Do you know payments your business makes under state and local tax credit programs may be tax deductible? The Internal Revenue Service (IRS) has issued a clarification to help business taxpayers understand when and how to deduct these payments on their federal tax returns. Your company could be taking advantage of this money-saving deduction immediately. Learn more about the IRS clarification.
What is the IRS Clarification?
The IRS received many inquiries about this issue and felt it needed more clarity. The clarification doesn’t change any IRS rules – it just provides an explanation, in case businesses are misunderstanding or are unaware of the rules. They explain that the availability of a charitable contribution deduction for contributions to state and local tax credit programs is not affected by a taxpayer’s ability to claim deductions for payments to charities and government entities.
What Does This Mean in Plain Language?
Still confused? Sometimes IRS statements are a bit difficult to comprehend for the average taxpayer, even when they’re trying to provide clarification. In plain language, the clarification means if your business is making payments to organizations – like charities or the government – and receiving tax credits, the payments are likely deductible on your taxes. But it depends on your overall financial situation. To be sure, consult a tax attorney.
Who Qualifies for This Deduction?
Individual taxpayers do not qualify; however, people who run businesses do. And virtually any type of business can qualify, including sole proprietorships, small businesses, big businesses, partnerships and corporations. As long as the expense qualifies under the IRS definition of an “ordinary and necessary business expense,” it can be deducted from your federal taxes.
What Are the Exceptions?
The main exception, which the IRS will always caution taxpayers about, is that you may not qualify for certain deductions if you have failed to pay taxes in the past or your tax payments are overdue. It depends on your exact tax situation. For this reason, it’s crucial to work with a tax attorney who can examine the big picture of your tax status and advise you on whether to claim the deduction.
Dutton Legal Group – Indiana’s Tax Resolution Law Firm
The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.