• 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 (506)
  • Guest Blog (113)
  • Homepage (22)
  • Small Business (1,002)
  • SMB Financial (328)
  • SMB Legal (66)
  • SMB Taxes (326)

Barbara’s Recent Posts

  • 10 Ideas for Coping with Cash Flow Challenges June 26, 2025
  • 5 Insurance Traps to Avoid June 24, 2025
  • Creating a Feng Shui Office Layout for Your Business June 20, 2025
  • Scaling Your Business by Optimizing Social Media Marketing June 19, 2025
  • The Timeless Value of Business Cards in a Digital World June 18, 2025
  • What Does the Latest IRS Data Book Tell Us? June 17, 2025
  • Business Advice from Famous Dads June 12, 2025
  • How Important Is Higher Education for Small Business Owners June 11, 2025
  • Business Planning in a Period of Uncertainty June 10, 2025
  • 9 Smart Financial Decisions for Business Owners in Retirement June 6, 2025
  • 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
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 26

AI returns have not yet justified investment mania https://on.ft.com/4l2VApu #smallbusiness #AI #investments

Reply on Twitter 1938364740998140199 Retweet on Twitter 1938364740998140199 Like on Twitter 1938364740998140199 Twitter 1938364740998140199
bigideas4sb Big Ideas for Small Business® @bigideas4sb ·
June 26

10 Ideas for Coping with Cash Flow Challenges https://bit.ly/3ttGBgf #smallbusiness #cashflow #finance

Reply on Twitter 1938337231116087463 Retweet on Twitter 1938337231116087463 Like on Twitter 1938337231116087463 1 Twitter 1938337231116087463
bigideas4sb Big Ideas for Small Business® @bigideas4sb ·
June 26

Scaling Your Business by Optimizing Social Media Marketing - https://bit.ly/4k3vK3p #smallbusiness #businessgrowth #socialmedia #marketing

Reply on Twitter 1938327669835223524 Retweet on Twitter 1938327669835223524 Like on Twitter 1938327669835223524 Twitter 1938327669835223524
Load More

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

  • Privacy Policy
  • Sitemap