 Income tax 2022-2023, business credits. Let's do some wealth preservation with some tax preparation. Most of this information comes from the Tax Guide for Small Business for Individuals who use Schedule C, Publication 334, Tax Year 2022. You can find on the IRS website, irs.gov, irs.gov. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Looking at the income tax formula, we're focused online. One income, remember on the first half of the income tax formula is an essence and income statement but just an outline of scaffolding other forms and schedules flowing into these lines. Schedule C being one of them, it being in essence an income statement in and of itself, income minus expenses or business deductions, the net income of which flows into line one income of our income tax formula here. This is the first page of our Form 1040. The Schedule C net income would flow in then to the Schedule 1 which would flow into page one line eight as we see on the Form 1040 here. This is the Schedule C where we have profit or loss from business in essence and income statement with income and expenses. Alright, let's take a look at the general business credits. Introduction, your general business credit for the year consists of your carry forward of business credits from prior year plus the total of your current year business credits. So if there are any carry forwards I would recommend just from a practical standpoint for a new client for example and generally if you're doing a Schedule C in general that's going to make the tax return more complicated so I would recommend putting the information into the prior year software trying to mirror what is on the prior year tax return in that software so that you can roll forward the prior year information and that's particularly useful when we have carryovers because that can help us the software can better guide us hopefully with those carryovers in that process in that way. So in addition your general business credit for the current year may be increased later by the carry back of business credits from later years so if we're not able to get a benefit in the current year the question is well then can I carry it back to a prior year and or can I carry it forward to a future year to get a benefit in a tax year other than the current year. So you subtract this credit directly from your tax so credits different than deductions and that they're going to be dollar for dollar benefit if you had a dollar versus credit versus a dollar deduction you would want the dollar credit generally because then you get the full dollar benefit of it whereas a deduction will decrease your income which will result in a benefit based on your tax rates. Alright useful items you may want to see form and instructions 3-8-0-0 general business credit so you can dive into that on the IRS website if you want to get into more detail 6-2-5-1 alternative minimum tax individuals so you can find those on the IRS website. Alright business credits all the following credits are part of the general business credits the form you use to figure each credit is shown in parentheses you will also have to complete form 3-8-0-0 some credits have expiration dates check the instructions for each credit to make sure it is available for 2022. So you've got so these are going to be kind of specific types of credits like most credits basically are they're going to be for specific types of things the government typically deviating from the general concept of an income tax remember a general concept of an income tax would mean that you would allow deductions for those things that you needed to consume in order to generate revenue because the tax should be based not on gross income but on net income that just makes sense from an income tax type of system that makes sense most clearly in the Schedule C that's why we have an income statement on the Schedule C but the government wants to incentivize us and adjust in other ways as well which leads to deductions that have nothing to do with expenses that we needed to consume to generate revenue and then this whole concept of credits which is outside the whole income statement all together which are other ways to kind of put in other things in there which will confuse things but also allow the government to provide incentives which you may be in favor or not in favor of any incentive alright so we have the alternative fuel vehicle refueling property credit that's on form 8-9-1-1 this credit applies to the cost of any qualified fuel vehicle fueling property so for more information on that one if that applies to you you can see form 8-9-1-1 look at the form and instructions on the IRS website for any of the credits that might be applicable to you the alternative motor vehicle credit that's on form 8-9-1-0 for more information for that you can go to form 8-9-1-0 biodiesel renewable diesel or sustained aviation fuel mixture credit obviously that's quite specific for the credit you got form 8-8-6-4 if you want to take a look at that in more detail biofuel producer credit that's on form 4-6-7-8 check that out on the IRS website carbon oxide sequestration credit so obviously some of these dealing with the global environmental kind of stuff so if that applies to you you can look at form 8-9-3-3 this credit is for carbon oxide that is captured at a qualified facility and disposed of insecure geological storage or used in a qualified enhanced oil or natural gas recovery project so in other words we're dealing with the carbon it's one of the major greenhouse gas type things one way to deal with that is to try to reduce the carbon emissions in the first place another way to deal with that is to try to grab the carbon that is in the air and take it out of the air is how I understand it and bury it or something or store it somewhere so that it's that would be the other concept so if you're dealing with that stuff you'll be able to get some credit money for it so for more information you can see form 8-9-3-3 credit for employer social security and Medicare taxes paid on certain employee tips for that you've got form 8-8-4-6 this credit is generally equal to your employer's portion of social security and Medicare taxes paid on tips received by employees of your food and beverage establishment the tip situation is customary so clearly if you're in an area where tipping is customary a restaurant the tip situation causes all kinds of weird stuff happening so you want to try to drill down on how you're going to deal with keeping in compliance with the tip situation will also be competitive in the industry so the credit applies regardless of whether the food is consumed on or off your business premises for more information you can see publication 8-8-4-6 credit for employer differential wage payments that's on form 8-9-3-2 this credit provides businesses with an incentive to continue to pay wages to an employee performing services on active duty and the uniform services of the United States for a period of more than 30 days so someone needs to serve on duty so then if you keep them on the payroll that's kind of like the incentive for that particular credit so credit for employer provided childcare facilities and services that's on form 8-8-8-2 this credit applies to the qualified expenses you paid for employee childcare and qualified expenses you paid for childcare resources and referral services for more information you can see form 8-8-8-2 and then there's the credit for increasing research activity I'm doing research on emotions and brain activity form 6-7-6-5 this credit is designed to encourage businesses to increase the amounts they spend on research and experimental activities including energy research that must be with those energy drinks or something I've been experimenting with those just kidding that doesn't qualify Red Bull doesn't qualify I don't think so for more information you can see form 6-7-6-5 so then you got the credit for small employer health insurance premiums that's form 8-9-4-1 this credit applies to the cost of certain health insurance coverage you provide to certain employees for more information there you can look at form 8-9-4-1 credit for small employer pension plan start-up costs that's on form 8-8-8-1 this credit applies to pension plan start-up costs of a new qualified defined benefit or defined contribution plan including a section 401k plan simple plan SEP plan so these come up fairly often for obviously small businesses because that's one of the biggest benefits that you can provide to an employee and also it's often beneficial to the employer so that they can put more money into a 401k simple SEP type of plan than they could otherwise do in like an IRA if they don't have that set up so you might also be able to look into the credit for small employer pension plan start-up as well for that so for more information you can see publication 560 retirement plans a disabled across credit disabled access credit that is form 8-8-2-6 this credit is a non-refundable tax credit for an eligible small business that pays or incurs expenses to provide access to the person who have disabilities so you're doing something specifically to provide more access access tonight having an elevator that's suitable for like wheelchairs or something like that might be something that would come to mind you must pay or incur the expenses to enable your business to comply with the Americans with Disabilities Act of 1990 for more information there you can see publication 8-8-2-6 Distilled Spirits Credit form 8906 this one sounds interesting this credit is available for distillers and importers of distilled spirits and eligible wholesalers of distilled spirits for more information you can see form 8906 you're going to get a benefit for distilled spirits that sounds I mean okay that's interesting so I thought they taxed you more they taxed you more for distilled spirits sometime but in any case I'm not in that industry I don't know but it ends and out of it Employee Retention Credit for Employers affected by qualified disasters you got form 5884A you may qualify for this credit if you continue to pay or incur wages after your business became inoperable because of damage from certain federally declared disasters so now the government has been trying to put in these items to try to keep employment up even in a situation where you don't need employees where you'd normally have to lay them off. And I'm kind of curious on what the actual end result of this is because it's trying to keep people on artificially into particular areas and incentivizing people to do that and whatnot, as opposed to trying to change things. I don't know. It's kind of interesting. I'm curious to see if that's having an overall net benefit in the long run or not. Because usually you would like to transfer, you know, whatever changed just to make the transition period as easy as possible so that people can go on to whatever the new thing is. My concern with these kind of credits are that that the downturn from whatever disaster happened could end up being permanent, which means you just kind of and if you just pay people to be stagnant in the same situation, instead of moving on to the next situation may not be beneficial all the time. But employer credit for paid family and medical leave form 8994. This credit applies for wages paid to qualify employees while they are on family and medical leave subject to certain conditions. For more information, you can see form 8994 for that one. You've got the empowerment zone employment credit that's on form 8844. You may qualify for this credit if you have employees and are engaged in a business in an empowerment zone for which the credit is available. That's going to be particular type of areas that that the government has labeled out as one in particular incentives because for whatever reason, low income areas or something like that. So so then you might have particular credits for hiring people or employees in the particular area. So for more information there, you can see form 8844. You got the energy efficient home credit form 8908. This credit is available for eligible contractors of certain homes sold for use as a residence. So for more information there, you can see form 8908. You've got the investment credit form 3468. The investment credit is the total of the several credits. So for more information on investment credits, there's it's got several credits involved. So if you want to dive into it in more detail, check out form 3468 on the IRS website, low sulfur diesel fuel production credit. That's form 8898. For more information, if you're dealing with low sulfur diesel fuel, you could check out form 8896 that is low income housing credit form 8586. This credit generally applies to each qualified low income building placed in service after 1986. So if you're in that industry, you could check that out for more information, you can see form 8586. You got the new markets credit that's on form 8874. This credit is for qualified equity investments made in qualified community development entities. And so you could check out 8874. You've got the orphan drug credit form 8820. This credit applies to qualified expenses incurred in testing certain drugs for rare diseases and conditions. So that would be a fairly specific credits, I would think qualified plug in electric drive motor vehicle credit. So another one of these environmental type of credits form 8936. This credit is for certain new qualified plug in electric vehicles placed in service during the tax year. So for more information 8936 on that one, you got the qualified railroad track maintenance credit. So that one seems awfully specific for maintenance of the old railroad track form 8900. This credit applies to qualified railroad track maintenance expenditures paid or incurred during the tax year. And then we've got the renewable electricity production credit form 8835. This credit is for renewable energy sources produced in the United States or US possessions from qualified energy resources at qualified facilities. So you could check that one out at form 8835. You got the credit for small employer pension plan startup costs and auto enrollment form 8881. You may qualify for this credit if you are a small employer who includes and maintains an automatic contribution arrangement in an employer sponsored retirement plan. So for more information 8881, you got the work opportunity credit that's on the form 5884. This credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. So for more information 8554 how to claim the credit to claim a general business credit, you will first have to get the forms you need to claim your current year business credit so you can research that more on the IRS website iris.gov. In addition to the credit form, you also need to file form 3800.