In this post, we’ll help you learn and understand about the following:
- The Tax Credit Biz Owners don’t know about for paying employees after Irma hit.
- The little known tax credit Biz owners in SWFL need to know about.
- Hurricane Irma and Your Biz: The tax credit you don’t know about!
Hurricane Irma is a household name in our neck of town here in Fort Myers, Florida. When that Hurricane ravaged through our city back in 2017 we all felt the effects in one way or another, whether we had damage to our homes, had a few terrible months because our business plummeted or have one heck of an evacuation story. We saw a lot of employers who didn’t pay their employees- many couldn’t while they didn’t have their businesses operating, but we also saw a ton of business owners who kept paying their employees even while they were not able to open their doors because they knew their people needed the money. Aside from being good Samaritans and really being there for their employees when they needed them, the IRS gave these wonderful business owners a fantastic tax credit!
Over the last two years we have reviewed countless returns where multiple other tax professionals were not aware of this nifty little credit, and therefore did NOT give their client credit for it on their tax returns. Actually, we have yet to see a tax return from ANY other tax preparer who did capture the credit.
So what is this seemingly secret credit that your tax preparer may have missed? We think it’s pretty great and think you will too! The IRS says that if you had to close your doors for the hurricane and were not able to reopen for a period of time, and paid wages during this time, you may qualify for it. Most of our clients closed to prepare for the hurricane, then after the hurricane hit they were not able to fully operate for 1-2 weeks because they did not have power, could not access gas or other necessary materials or were dealing with failing phone and computer systems. These all count towards the time while your business was not able to operate. If, for example, you closed down Friday before the hurricane hit (on Saturday), then did not have power, phones and internet for another ten days, BUT continued to pay your employees during this timeframe, you may be eligible for the credit for all wages paid from the Friday you closed pre-hurricane all the way up until when you were considered fully operational again. The other sweet part of this- you would still qualify for the credit even if during that timeframe you had some of your employees doing what they could and partially working; Your timeframe to count towards the credit is the entire duration of time until your business was fully operational again regardless of anyone was working, in full, in part, or not at all. The EXACT timeframe that you are able to qualify for is 9/4/17-1/1/18… so if you were unfortunate enough to still be inoperable throughout January 2018, your cutoff timeframe for wages paid would be 1/1/18.
The credit is a percent of wages paid- bear with me while we dive into some numbers! The credit is equal to 40% of up to $6,000 of qualified wages paid per employee. If you paid four employees $3,000 each while you were inoperable, that’s a total of $12,000 ($3,000 wages X 4 employees). The credit is 40% of the wages paid, which is $4,800 ($12,000 X 40%). That’s on top of the normal expense you get for the actual wages being paid, so for these wages you get an extra- benefit!
What about if you have someone you paid more than $6,000 to? Let’s look at a different example:
Daisy Dental Design was closed for 2 weeks after Hurricane Irma hit as they had no power for the first week, and while they did reopen when their power came back on after the first week, they did NOT have phone or internet for another week. They are potentially eligible for wages paid during that entire two week time until they regained normal function. During this timeframe they paid the following wages: Daisy Dentist (owner taking wages) $10,000; Donald Dentist $7,000; Tina Technician $2,500; Tedy Technician $2,500; Taylor Technician $2,500; Rosy Receptionist $1,500; Amanda Admin $2,000. That’s a total of $28,000. Daisy and Donald were paid over the $6,000 per employee wage limit though, so their qualifying wages are limited to $6,000/each. The qualifying wages for the credit are actually $23,000 (all wages, with Daisy and Donald limited to $6,000 each). The tax credit is equal to 40% of $23,000, which is $9,200.
Most of our business clients were affected by the hurricane in some way in their business, and this little known wage retention credit was a great way for them to recoup some of their lost money or earnings from this traumatic storm. Not sure if your tax professional captured this on your return? OR know they did not get this? Good news! You may be able to amend your tax return to include this and possibly get some money back from the IRS (it’s always fun when the IRS is writing YOU checks, not the other way around!), but there is a time limit on this. If you catch it in time you can amend your return and get some extra money in your pockets but if you miss the timeline to amend your return…. Tough luck, the IRS gets to keep it. We are happy to offer you a complimentary review of your return to let you know if this credit was in fact captured… or if we can help you line your pockets a little more this holiday season!