• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Facebook
  • Instagram
  • LinkedIn
  • Twitter
  • YouTube
Big Ideas for Small Business logo

Barbara Weltman

Big Ideas for Small Business, Inc.

Whitepaper download

Subscribe and download our eBook, "150+ Tax Deductions for Small Business A to Z."

This field is hidden when viewing the form
Get the:

  • Home
  • About Us
  • Big Ideas For Your Business
    • Idea Of The Day ®
    • SMB Legal
    • SMB Taxes
    • SMB Financial
    • Small Business
    • Newsletter Archive
  • Services
  • Books
  • Blog
  • Multimedia
    • Videos
    • Radio Shows/Podcasts
  • Be a Guest Blogger

Tax Credit Refunds—What to Know

November 3, 2022 / By Barbara Weltman

Tax Credit RefundsTax credits are a dollar-for-dollar reduction of taxes owed. Some credits offset income taxes; others offset employment taxes. Some credits are part of the general business credit and subject to an annual limitation; others are fully refundable (they can be recouped in excess of what taxes are owed). For pass-through entities, the business must qualify for the credit, but owners claim their share on their personal returns. In some cases, limitations apply at both the entity and owner levels. If all of this sounds complicated, that’s because it is…and you need to work with a tax professional. The following will help you ask the right questions.

To help you ask the right questions, here’s what you need to know:

Tax credit refunds in general

Income tax credits for businesses are part of the general business credit which is not a separate credit but a limitation on total credits. So, first you figure individual credits that are part of the general business credit, such as the work opportunity credit and the research credit (below) and then you apply the general business credit limitation. In general terms, this is net income tax minus the greater of 25% of regular tax liability over $25,000, or 75% of the tentative minimum tax (something that applies to owners of pass-through entities and certain large C corporations after 2022).

If total credits exceed the limitation, the excess is carried back one year and is subject to the limitation for that year. You can’t waive this carryback; it’s claimed on an amended income tax return or file for a quick (tentative) refund. Still have credits in excess of the limitation? There’s a 20-year carryforward.

Research credit refunds

To obtain an income tax refund from the research credit, you must provide “five items of information”:

  1. Identify all the business components to which the research credit claim relates for that year.
  2. For each business component, identify all research activities performed and
  3. Name the individuals who performed each research activity,
  4. As well as the information each individual sought to discover.
  5. Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year.  This may be done using Form 6765, Credit for Increasing Research Activities.

Faulty refund claim. If you submit a refund claim but don’t include all required information, the IRS gives you 45 days to “perfect” your claim. The IRS likes missing information to be faxed to them at the number provided in the notice requesting the missing information. The 45-day grace period runs only to January 10, 2024. After that, you better get it right the first time.

Employee retention credit refunds

The employee retention credit (ERC) is a refundable employment tax credit meant for businesses who continued paying employees while shut down due to COVID-19 or had significant declines in gross receipts from March 13, 2020, to December 31, 2021. Eligible taxpayers can claim the ERC on an original or amended employment tax return for a period within those dates, and an unspecified number of businesses have done so.

Many businesses are still waiting for their funds. And some may never obtain them because they were erroneously claimed. There have been third parties that charged large upfront fees or fees contingent on the amount of a refund that advised businesses to take improper positions (e.g., the business wasn’t eligible or incorrectly figured the credit). The IRS warned businesses of these spurious claims.

Final thoughts

The list of credits has been expanding year by year as Congress incentivizes certain actions. For example, starting next year, there’s a new credit for commercial clean vehicles. Check which credits you may qualify for now. If you’ve overlooked any and your time for filing an amended return hasn’t expired, submit a refund claim. Work with your CPA or other tax adviser to determine the best course of action for your situation.

Tags credit refunds general business credit income tax refund research credit small business tax credits

Primary Sidebar

Categories

  • General Business (498)
  • Guest Blog (109)
  • Homepage (23)
  • Small Business (992)
  • SMB Financial (323)
  • SMB Legal (66)
  • SMB Taxes (325)

Barbara’s Recent Posts

  • Preview of Tax Changes this Year: Actions to Take Now June 5, 2025
  • Becoming Penniless: What Does this Mean for Your Business? June 3, 2025
  • Scale Your Business by Stepping Up IP Protection May 29, 2025
  • Disasters Happen: It’s Important to Be Prepared Now May 27, 2025
  • How Work Order Software Transforms Small Business Operations May 26, 2025
  • The Numbers Are Up for Sole Proprietorships May 22, 2025
  • New Business or Project Crowdfunding: What To Know May 20, 2025
  • Old-School Estimating vs. Smart Solutions: What’s Really Holding You Back? May 19, 2025
  • Employees Getting Called to Public Service: What to Know May 15, 2025
  • Not Too Late to Prep for Summer Now May 13, 2025
  • How Will the Next Generation of Learners Affect the Workplace May 12, 2025
  • Moms Know Best: Lessons for Entrepreneurs May 8, 2025
Awarded Top 100 Small Business Blog medal (link will open in a new window or tab)
Marquis Who's Who 2023 Badge
Top Small Business Blogs (Link will open in a new window or tab.)
8 Financial blogs small business Owners Need to Read. Invoice home.  (link will open in a new window or tab)
Best Small Business Blog, Expertido.org
Top 50 Small Business Blogs 2018
Best Small Business Blogs
BizHumm Top 100 Business Blog Award to Barbara Weltman
FitsSmallBusiness.com: Award for Best Small Business Blog 2017 (link will open in a new window or tab)
FitsSmallBusiness.com: Award for Best Small Business Blog 2016 (link will open in a new window or tab)

Footer

Big Ideas for Small Business logo

Small business ideas, business tax news and small business consulting from Barbara Weltman to provide business owners with the information they need to succeed. Visit our small business blog, Idea of The Day®, small business books and articles on small business taxes, small business finance and small business legal advice.

Contact Us

[email protected]

(772) 492-9593

gacor maxwin situs slot thailand terpercaya situs slot gacor situs gacor akun pro thailand slot bandar togel terpercaya

Latest Tweets

bigideas4sb Big Ideas for Small Business® @bigideas4sb ·
June 4

Building Capacity For Breakthrough Innovation - Branding Strategy Insider https://bit.ly/4dLAYz4 #branding #smallbusiness #innovation

Reply on Twitter 1930377351126245602 Retweet on Twitter 1930377351126245602 1 Like on Twitter 1930377351126245602 2 Twitter 1930377351126245602
bigideas4sb Big Ideas for Small Business® @bigideas4sb ·
June 4

3 Lessons from Cycling for Life and Work

Reply on Twitter 1930364633388392612 Retweet on Twitter 1930364633388392612 Like on Twitter 1930364633388392612 Twitter 1930364633388392612
bigideas4sb Big Ideas for Small Business® @bigideas4sb ·
June 4

As hurricane season approaches, it's critical for small businesses to have disaster preparedness plans in place. Stay informed + ready for whatever comes your way! See our top stories!
#SmallBusiness #HurricanePreparedness #MentalHealth #Crowdfunding https://conta.cc/4kNGmEl

Reply on Twitter 1930284955151507738 Retweet on Twitter 1930284955151507738 Like on Twitter 1930284955151507738 1 Twitter 1930284955151507738
Load More

Copyright © 2008–2025 Big Ideas for Small Business, Inc  |  Designed by Hudson Fusion

  • Privacy Policy
  • Sitemap