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Monetization of Research and Development (R&D) Tax Credits

Start-ups and small businesses that were previously unable to benefit from the R&D tax credits due to lack of taxability should take advantage of the payroll tax liability offset.  Internal Revenue Code (IRC) Section 41(h) allows start-ups and small businesses to use the tax credit up to $250,000 to offset against payroll tax liabilities.

Qualified Small Businesses (“QSB”) may elect to use R&D credits to offset up to $250,000 of payroll tax liability. A QSB is a corporation, partnership, or individual with less than $5 million of gross receipts during the taxable year AND did not have gross receipts for any tax year before the fifth tax year ending with the year of the claim. The payroll benefit can be claimed in the first quarter subsequent to filing the prior year income tax return.

The payroll-tax offset is available to eligible new businesses and start-up companies for up to five years. Any unused R&D credits that aren’t elected to offset payroll taxes may be carried forward for up to 20 years and used when the business becomes profitable.

Businesses with research and development activities should consult with their tax advisor if they can benefit from the credit.

Incentives for Green Energy (English Version)

President Joe Biden signed the Inflation Reduction Act (IRA) of 2022 into law on August 16, 2022. The bill includes numerous investments in climate protection, including tax credits for households to reduce energy costs, and investment in clean energy production to reduce carbon emissions. Here are some incentives which can benefit individual taxpayers who are planning to purchase electric vehicles and install solar PV system on their residence.

Solar Investment Tax Credit: The federal government has incentivized homeowners to switch to solar through the solar investment tax credit (ITC), also known as the federal solar tax credit. The rate of this credit has fluctuated over the years. The IRA included an extension of the ITC. Starting on January 1, 2023, homeowners can now claim 30% of their total solar photovoltaic (PV) system installation costs as a deduction on their federal taxes. The ITC will decrease to 26% in 2033 and drop to 22% in 2034.

The ITC is available for solar customers throughout the United States. However, specific qualifications must be met to take advantage of the tax credit; (1) Solar PV system must be in place by the end of a year  to qualify for 30% deduction on the same year tax return, (2) The solar PV system must be new or being used for the first time during the specific year, (3) you must own the solar PV system. You cannot claim the tax credit if you lease your system or agree to Power purchase agreement, and (4) the solar PV system must be located at your primary residence or secondary home in the United States.

EV tax credit: The federal government has provided EV tax credits up to $7,500 to consumers who purchased battery electric vehicles through Qualified Plug-in Electric Drive Motor Vehicle Credit since 2010. The IRA amended the EV tax credit, which includes an extension of the credit with new assembly requirements. In addition, it provides a reduced $4,000 credit to taxpayers who purchase used EVs. If the taxpayer entered into a written binding contract to purchase a new qualifying electric vehicle and did not take possession of EVs before August 16, 2022, the taxpayer may claim the EV credit based on the rules before amendment.  If the taxpayer purchases and takes possession of an electric vehicle between August 16, 2022 and December 31, 2022, the vehicle must be assembled in North America.  To be qualified for the EV tax credit from January 1, 2023, battery components should be assembled and made of critical minerals which are extracted, processed, or recycled in North America. In addition, the percentage of the value of the battery’s components that were manufactured or assembled in North America has to exceed a certain threshold.

In addition to EV federal tax credit, California residents can apply for Clean Vehicle Rebate Program (CVRP) and get up to $7,000 to purchase or lease a new plug-in hybrid electric vehicle, battery electric vehicle, or a fuel cell electric vehicle.

Recent Updates to Tax

Social Security Taxable Income Increase

In 2023, individuals will be subject to Social Security tax on employment earnings up to $160,200 annually.  The amount, an increase from $147,000 in 2022, I the wage base limit that subjects to earnings subject to OASDI tax.  The employee and the employers each will pay up to $9,932 of Social Security tax in 2023.

Per Diem Rate Increase

IRS issued Notice 2022-44 increasing special per diem rates by which taxpayers may substantiate ordinary and necessary business expenses of travel away from home, which is effective October 1, 2022.   The rate for travel to high-cost localities within the continental United States is $297.  The rate for travel to non-high-cost localities will be $204.  The portion of the rates treated as paid for meals for purpose of IRC section 274(n) is $74 and $64 for high-cost localities and all other localities, respectively.   2022-2023 Special Per Diem Rates (irs.gov)

FinCEN Reporting For Beneficial Ownership Information

Treasury Department issued final regulations requiring certain entities to file with FinCEN reports that identify the beneficial owners of the entity.  Under the final regulations, a beneficial owner includes any individual who, directly or indirectly, either exercise substantial control over a reporting company, or owns or controls at least 25% of the ownership interests of the a reporting company.

The final regulations provide technical definition of the terms “substantial control” and “ownership interest.”  Taxpayers should consult with their tax advisors to understand the nature and breath of their potential reporting obligations per the final regulations.

IRS relieves penalties for 2019 and 2020 (Korean version)

국세청이 발표한 Notice 2022-36에 따라 2019년과 2020년 과세연도에 대한 세금신고의 미신고분 Penalty가 자동으로 면제된다. 이러한 벌금을 이미 납부한 것으로 추정되는 160만 명의 납세자들은 자동으로 총 예상금액 12억 달러의 환불 또는 공제를 받게 될 것이다. 납세자들은 이 면제를 요청할 필요 없으며, 국세청은 다음 달 말까지 환급금의 대부분을 자동으로 지불하거나 공제 적용할 것이라고 말했다. 그러나, 아직 제출되지 않은 2019년도 2020 년도 과세연도에 해당하는 세금신고서는2022년 9월 30일까지 제출하여야 미신고분 Penalty를 면제받을 자격이 된다.

면제를 받을 수 있는 세금 신고서는 Form 1040, 1041 및 1120 시리즈에 명시된 신고서, Form 1066 U.S. Real Estate Mortgage Investment Conduit (REMIC), Form 990-PF Return of Private Foundation또는 Section 4947(a)(1) Trust, 그리고 Form 990-T, Exempt Organization Business Income Tax Return and Proxy Tax Under Section 6033(e) 등이 있다. 또한 Form 1065, Partnership 소득 신고서 및 양식 1120-S, (S Corporation에 대한 미국 소득세 신고서) 도 면제 대상이 된다.

 
이 Notice 2022-36는 면제 가능한 신고서로 Form 5471 (특정 외국법인에 대한 미국인의 정보신고서), 그리고 Form 1065및 1120에만 첨부되는 Form 5472 (25% 외국 소유의 미국법인 또는 외국법인의 정보신고서)를 포함한다. 하지만, 납세자가 특정 국제 정보 신고서를 (예: Form 5471), 1065 및 1120 이외의 신고서 즉,  Form 1040 또는 1041같은 신고서에 첨부하여 제출하는 경우 미신고 Penalty 부분에 대한 면제를 제공하지 않는다.

 

자세한 내용은the Notice 2022-36 를 참고하기 바란다.