Nebraska Microenterprise Tax Credit

All it takes is three easy steps for your business to receive up to $10,000 in free tax credits!

Here are the three steps you need to complete in order to qualify your business to receive these credits:

• One – determine if your business qualifies – don’t fret; well over 90% of new businesses qualify;
• Two – follow the rules and complete the required paperwork, and finally
• Three – grow your business during the two year earnings period.

Step One – qualification.  Your business qualifies if

1. It has five or fewer “qualifying” employee equivalents at the time of application;
2. It participates in the federal employee verification program known as E-Verify;
3. If your business is operated in an eligible address in Nebraska.  If you are located in Douglas, Lancaster, or Sarpy counties you are good, as each of these counties is 100% qualifying. There are three counties (Buffalo, Cheyenne, and Washington) which contain a few census tracts which don’t qualify for the credit.
4. It is an active business (not passive, as is defined for federal income tax purposes); and
5. If it is a farm or livestock operation–only if the operations’ net worth is $500,000 or less;

Does your business qualify?  Most do.  Now, let us look at step two.

Step Two – follow the rules and complete the paperwork.

Following the rules means reading and following the directions.  Tasks to complete are as follow:

1. File paperwork, with the Nebraska Department of Revenue, for all required tax programs
2. Set up the business for E-Verify and use it to verify work eligibility of new hires
3. Prepare the tax credit application, and be approved for the program (in order to use 2016 as the base period, the application must be postmarked by the end of October 2017)
4. Keep the records required to prove that your business has growth
5. Prepare and file Form(s) 3800N “Nebraska Incentives Credit Computation, Worksheets, and Schedules” to claim the credit that you have earned

Yes, step two is a bit tedious, but not difficult.  If you need help, I can take care of all of these tasks for you.
Did you hear me? I said I can take care of all the step two tasks for you.
Now, since step two has been dealt with, it is looking like you are well on your way to earning and receiving the credits – yeah!
We are almost done – now, let’s go see step three.

Step Three – grow your business.

The credit is awarded at a rate of 20% of “growth” in either or both of the two factors investment and employment.  Let’s take a look at the two factors…

Investment –is dollars the business spends, as “an investment” in the businesses’ future.  Examples include:

• Purchase of property – real or personal; virtually everything except motor vehicles count!)
• Repairs of property (virtually everything except motor vehicles)
• Advertising expenditures
• Legal and Professional fees
• Signing a lease to purchase the use of property (real or personal; both qualify.  Motor vehicles do not) for a period of time.  This section has huge potential but is complicated. If you have signed a lease or are contemplating signing one, please call me and I can explain the matter to you.

Compensation –is dollars you pay out, for the benefit of your employees.

There are two categories of spending:

1. Wages and salaries (including overtime and vacation pay); and
2. Health insurance costs you pay for your employees

There are some limitations.  Compensation does not include:

• Amounts paid to subcontractors for services rendered.
• Amounts paid to employees in excess of 150% of the Nebraska average weekly wage; which for 2021 applications is $1,380 per week.
• Amounts paid to employees who are not Nebraska residents.

New businesses and also already-existing businesses are eligible to participate in this program

• New businesses receive credits on all $ spent, as any $ spent is “growth”
• Existing businesses can grow and receive credits as well, if they grow

Bottom line – if this business is your full time job, you will spend money in at least one and in most cases both factors.
Money spent equals tax credits – plain and simple.

Let’s look at two examples:

One – a retail establishment, opening on July 1 of 2016.  You’ve signed a 3 year lease at $1,000 per month.  Store fixtures cost $20,000; advertising including website development cost $15,000, and you will pay your employees $18,000 in 2016. Your credit is $10,000; as we see below:

Qualifying compensation

Wages and salaries                  $18,000

Health insurance                         $ -0-  

Subtotal                                      $18,000

Total investment is $89,000; limited to $50,000.  Your credit is $10,000 (20% of $50,000).

Two – a consulting business, opening on July 1 of 2016.  You are operating the business out of your home.  Equipment costs $10,000; advertising including website development cost $10,000, and you will pay your employee $24,000 in 2016.  Your credit is $8,800; as we see below:

Qualifying compensation

Wages and salaries                $24,000

Health insurance                    $ -0-

Subtotal                                $24,000 

The total investment is $44,000. Your credit is $8,800 (20% of $44,000).

Clear as mud? I recognize that all of this information can be very confusing. Call me – I can talk with you and help you determine how much your business can qualify for and earn from this program. The call will be well worth the time; trust me!

I can work with you and prepare for you all the paperwork that needs to be prepared so that you can receive these tax refunds. I understand how this program works so you don’t have to; all you need to do is call me and we can get down to business.

I have helped many Nebraska Businesses get their share of “found money”.

Why Not You? Contact me Today!