How CTI Helped A CPA Firm Sort Out A Client’s Tax Liability Issue

Written by Darren Labrie, CPA. Updated Nov 17, 2015.

How CTI Helped A CPA Firm Sort Out A Client’s Tax Liability IssueA CPA firm had a client with an unexpected state tax liability. The firm was unsure of how to handle this delicate matter with the client, especially in terms of how to minimize the liability by utilizing available tax credits the client may qualify for.

The Problem

The CPA firm had already advised the client on the amount of their estimated tax payment and were concerned about communicating this unexpected bad news. The tax liability could have resulted in underpayment tax penalties.

Per IRS rules and regulations, if you do not pay enough tax, either through withholding or by making timely estimated tax payment, you will have underpaid your estimated tax and may be subject to a penalty. There are a number of special rules and considerations for underpayment tax penalties.

The Solution

One of the CPA firm’s partners remembered an earlier presentation he attended with CTI,  where CTI discussed going back to prior years and securing tax credits to offset tax liabilities. The partner contacted CTI about receiving some assistance in this particular client matter.

Immediately, CTI completed a discovery of the client’s business operations, specifically looking for the company’s qualifications in terms of tax credits and incentives programs. They identified a state program providing tax credits that would be carried over to the current year.

The Result

Not only did the tax credits from the identified state program offset the unexpected tax liability for the client, but the program also provided a further reduction of their tax liability to produce a tax refund in the current year.

The entire project to reduce the client’s tax liability and avoid underpayment penalties was completed in less than 30 days, allowing the benefit to be reflected before the filing date of the client’s state tax return.

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Topics: R&D Tax Credit, Employment Incentives, Training Incentives, Property Incentives

Darren Labrie, CPA

Written by Darren Labrie, CPA

Darren brings more than 20 years of experience in tax credits and business incentives. In his current role, he focuses on the overall operations of the practice and ensuring the highest level of service to clients.