If you are a business owner and are reading this blog post you are obviously trying to find out how to keep more of your company's revenue in the bank instead of turning it over to the state and federal tax coffers. This blog post is specific to Georgia companies and the Georgia Department of Revenue bills you get each year.

Georgia has 31 different tax credits and incentives, but the specific tax credit I want to talk about is the Georgia Retraining Tax Credit. Only 1% of companies take advantage of tax credits but most every business can take advantage of at least one tax credit. This tax credit is applicable to ALL for-profit businesses in Georgia. The premise of it is to reward employers for empowering and improving their workforce and expanding their businesses. Georgia has done a terrible job of educating small businesses about this valuable tool for increasing the return on their investments.

So what is the difference between a tax credit and a tax deduction and why should you care?
Here is a simple explanation.

Effect of $10,000 tax deduction
Adjusted Gross Income: $100,000
Deductions: $10,000
Taxable Income: $90,000
Georgia Tax Rate: 6%
Total Tax Due: $5,400

Effect of $10,000 tax credit
Adjusted Gross Income: $100,000
Taxable Income: $100,000
Georgia Tax Rate: 6%
Tax Due: $6,000
Minus Tax Credit: $10,000
Total Tax Due: $0
And as a bonus you get to carry forward that extra $4,000 for up to 10 years. That's money in the bank.

So instead of writing a check for $5,400 to the GDOR you get to keep that money. Tax credits are a dollar for dollar credit against your final tax liability. The extent of the effect of a tax deduction is only as large as your tax bracket. If your tax bracket is 6% you only get a 6% reduction in your tax liability. Tax credits are a 100% reduction in your tax liability.

The amount of the Georgia Retraining Tax Credit is based on the number of qualified employees that undergo training, and the amount of training costs you incur for each employee. For 2009, your tax credit may not exceed $1,250 per person. However it is important to note that you can file an amended return for three years in arrears until December 31, 2010 (which means you can go back and file a return for 2006, 2007 and 2008) and there is no limit to the amount of credit you can receive per employee! Next year you can file an amended return for only 2008 and 2009 and beginning January 1, 2011 you can only file an amended return for one year in arrears.

How do I know if my business qualifies?
Do you use accounting, payroll, internet or other proprietary software in your business?
Do you use a telephone system in your business?
Do you have a security system in your business?
Do you use copiers, fax machines, binding equipment, manufacturing equipment or any other equipment that requires human interaction in your business?
Do you have to train staff on how to use these items when you upgrade the software or equipment?
If you can answer yes to any of these questions then your business most likely qualifies for this tax credit. There are a few other requirements:

How do I know which employees qualify?
Retraining credit is only valid for employees that are Georgia residents.
These employees must be with your company for at least 16 weeks.
These employees must be employed atleast 25 hours or more per week.

How much is the tax credit?
For 2009 the credit is for 50% of your costs up to $500 per training program and $1,250 per employee per year. Remember in previous years there was no cap so filing amended returns is a great idea to re-capture past years taxes paid. There is one moe stipulation - you can only use your retraining tax credit to offset up to 50% of your tax liability. So if your tax liability is $5,000 and your tax credit is $7,500 you can only use $2,500 of your tax credit this year. You can carry forward the remaining $5,000 for 10 years.

Didn't I already get a deduction for all of these costs?
This is where the wow factor comes in. This is the only true legal double dip.

Lets say you have 5 employees and you sent each of them to one conference to learn updated software or equipment a year. Lets say this conference had a registration cost of $500 for each employee. Additionally you had to fly each of the employees to the conference at the cost of $400 each. The hotel stay for 2 days was $300 each. And the conference was during a work week. Lets say each employee cost the company $30000 in gross salary expense. Here is how much of a tax credit you would get for this training.

Each Employee Costs: $500 registration fee, $400 airline ticket, $300 hotel stay, 16 hours of missed work at $19.23 hour cost.
Deduction for cost of training for each employee: $1,507.68
Total Tax Deduction for Training: $7,538.40
50% tax credit allowance: $500 per employee (since 50% of $1,507.58 is more than $500 you can only take $500)
Total Tax Credit for Training: $2,500
So you get an additional tax credit of $2,500 on top of your deduction!

So lets apply this simple example to your tax return

Adjusted Gross Income: $100,000
Deductions: $7,538
Taxable Income: $92,462
Tax Rate: 6%
Tax due before credit: $5,448
*Minus Tax Credit: $2500
TOTAL Tax Due: $2,948

* you can use the entire tax credit in this case because it is less than half of your tax liability

This one training cut your taxes due by almost half!

How do I do this?
Well filing for the Georgia Retraining Tax Credit is actually pretty intimidating which is why I had never looked into it before and why 99% of companies don't bother. Nothing to do with taxes is ever easy. BUT....luckily there are companies whose sole line of business is to file for tax credits for businesses! I was very fortunate to get introduced to McMillian and Associates. The work for you is simple. Keep an attendance sheet for each training session you conduct or your employees attend, get a trainers bio for the training and turn the paperwork in. Oh and by the way Internet training like webex and podcasts are completely legitimate training tools. Employees don't actually have to travel to outside training. You can do any of your training in your own office at your own computers.

How much does it cost?
Well it doesn't cost you anything if they don't find a tax credit for you? Where else can you have a company work their hind ends off for you and not charge you if they aren't successful except for lawyers? The way they get paid is they keep a percentage of the tax credit they find for you. So for example, lets say you contract with McMillian and Associates to file your tax credits, and they find $10,000 in tax credits for you for your 2009 return. You pay them $2,000. But remember you are keeping $10,000 of the taxes you would have handed over to the State of Georgia so you are still $8,000 ahead. And that $2,000 you pay them for their services is deductible as a business expense next year.

How do I get started?
Call me at (706) 353-2048 or email me at ssharp@plexusweb.com and i'll make the introduction to McMillian and Associates. There is a free one day training seminar at McMillian and Associates and it includes lunch. You can send a staff member if you, the business owner, can't attend. At this session you will learn to identify when a qualified training has occured and will be given the proper forms to keep on each training session. It is really very easy to maintain the records once you have participated in the training. Remember there is no cost unless you actually get tax credits!