The general business credit is an umbrella term for a group of tax credits available to business owners and independent contractors. These credits act as incentives for people running their own businesses, providing them with more cash in hand to operate with. The amount claimed in credit can be deducted directly from the tax due, providing an immediate rebate or discount on taxes for the business owner or independent contractor. This allows businesses to retain funds that they can reinvest in themselves, use to hire employees and create jobs, and invest in their communities.
A number of different credits are available under the general business credit including fuel credits, credits for natural disasters, employment credits, credits for businesses in distressed communities, and investment credits. For each credit, a separate form must be filed to document eligibility, and the credits themselves are listed on another form that is used to calculate the total general business credit available for the year.
There is a limit on the amount people can take as a credit, based on their income. If the number of credits being claimed exceeds this limit, taxpayers are allowed to carry the excess over into another tax year. Thus, the general business credit can include credits carried forward from prior years, in addition to credits for a current year. It is also possible to carryback general business credit, allowing people to claim refunds on prior tax years.
Businesses that incur expenses or experience events that qualify for the general business credit should make sure they have ample documentation to prove it. This documentation does not need to be filed with the tax paperwork, but will need to be produced in an audit to confirm that the credit was not claimed under false pretenses. People who are not sure about whether or not expenses will qualify can provide an accountant with the documentation and ask for an opinion.
Available credits vary from year to year. Tax preparers usually have a current list of available general business credits and can provide advice on filing for them. It is also possible to order publications directly from tax authorities to get information about the general business credit. These publications also include the necessary forms along with directions on filling them out so that taxpayers can confirm that they are filing properly. Making a mistake will result in a correction from the authorities, and may expose taxpayers to the risk of an audit if the mistake arouses suspicions.
