Retention Credit – “It’s not SALY”

retention-credits-not-salyTax return preparers know the shortcut in preparing current year returns, called “SALY”. SALY stands for “same as last year”. The SALY shortcut provides a quick method to review a tax return before filing using the prior year return as a guide. While the numbers from year to year are most certainly different, for the most part the annual transaction cycle is repetitive – and the look and feel of the return is similar from year to year.

Understanding the propensity of tax preparers to rely on SALY, certain tax credits or exemptions lasting only a short period of time are often overlooked – because frankly we find an over reliance on SALY. Such is the case with the retention credit, one of two “gimmies” as part of the HIRE Act. If the reader is unfamiliar with the retention credit, a one-time federal credit for hiring and retaining unemployed workers in 2010, read on.

Hidden Retention Credits

To some extent, we believe an over reliance on SALY led to employers often failing to claim the retention credit. The retention credit awarded employers a credit of up to $1,000 for each unemployed worker the employer hired in 2010 and retained for a year. But the retention credit was only available in 2011. A preparer using a 2010 SALY reference point would not see a retention credit – and therefore more likely overlook the opportunity for 2011. Moreover, the payroll tax exemption part of the HIRE Act was for calendar year 2010 leading many employers to “forget” about the 2011 income tax credit.

Barnwell has assisted several large companies in either working up the retention credit on an amended return, or in many cases “truing up” the credit. For various reasons in instances where the credit is not “missed” we find, more often than not, that the retention credit is under claimed. Reasons for this vary, including the omission of divisions, incomplete “survey” activity, and failure to claim the retention credit on WOTC-eligible employees.

Schedule Complimentary Consultation

In Summary, Barnwell Consulting, LLC can:

  • Find state income/franchise tax refunds and have collected millions of dollars in cash refunds
  • Assist with altering corporate structure when good business purpose exists, to help lower state income tax liabilities
  • Assist with FIN 48 accruals, but more importantly with strategies to resolve FIN 48 uncertainty projects that help companies lower the state effective tax rate.
  • Handle complex income and sales/use tax audits and have been successful in eliminating or reducing material assessments
  • Assist clients with SALT issues in acquisitions and divestitures
  • Identify credits and incentives, which fall into two broad categories, statutory and negotiated. With respect to the former, we see our job less as identifying statutory credits – and more focused on whether our client has fully recognized the credit, and obtained the maximum possible benefit.