Don't Miss Out on the Chance to Boost Your Bottom Line with Tax Incentives
By Marky Moore Founder, Capital Review Group | October 11, 2015
Hotel owners wrestle with numerous costs in the operation of their businesses, from staffing to paying sales taxes to expenses associated with maintaining the building. Fortunately, the federal tax code equips businesses in the hospitality industry with an array of incentives and strategies to help offset these costs. However, these potentially lucrative opportunities for tax savings are often overlooked by businesses that are unaware how to capture them. By reexamining their tax-planning strategies, hoteliers may uncover substantial savings that will reduce their tax burdens and improve the cash flow of their businesses.
Sales Tax Review
Nearly 10,000 sales and use tax jurisdictions exist in the United States. As a result, the landscape of sales and use taxes forms a mystifying mosaic of rates and exemptions that vary between localities. Hotels in particular contend with an assortment of sales taxes arising from various facets of their operations, such as occupancy taxes or taxes associated with banquets or the sales of items in the gift shop or restaurant. As a result, many businesses, particularly those that operate in multiple jurisdictions, erroneously overpay these taxes. Investing in a professional sales tax review will help businesses identify overpayments so that they may properly claim refunds.
Work Opportunity Tax Credit (WOTC)
Hiring new employees is an expensive yet necessary step in maintaining a business. The federal Work Opportunity Tax Credit (WOTC) helps to reduce the financial sting of the staffing process by allowing employers a credit of up to $9,000 per new employee hired from a qualifying target group. Target groups include those who have traditionally faced significant barriers to employment, such as certain veterans, youths, ex-offenders, and recipients of government assistance. A complete list of the specifications for each target group is available at the U.S. Department of Labor's website.
The credit is available to businesses of all sizes, and there is no limit on the number of new hires who may qualify. As long as an eligible employee works for at least 120 hours, the business can receive a credit for all wages paid. If the worker completes between 120 and 400 hours, the credit amounts to 25 percent of the first year wages, up to $6,000. If the worker completes more than 400 hours, the employer receives a credit of 40% of wages paid, up to $6,000. Employers may capture the maximum tax savings of $9,000 over two years by hiring eligible long-term recipients of family assistance. In that case, the credit amounts to 40 percent of wages earned during the first year and fifty percent of second-year wages, up to $10,000 annually. Employers seeking to claim WOTC must request certification from a state workforce agency by filing a Form 8850 within 28 days of the new hire's first day of work. If the state agency approves the application, the employer then must file with the IRS.