Companies frequently use tax credits to lower their taxable income. If your company qualifies for any of these tax credits, you'll need to complete a separate application for each recognition and submit it alongside your completed IRS Form 3800. Find out who can claim company tax credits and how to file Form 3800 to get your money back.

Why Do I Need to Fill Out a Form 3800?

To get a tax refund, taxpayers must fill out IRS Form 3800. Businesses can use tax credits to lower their tax liability or raise their refund by the same amount. To incentivize particular corporate behaviors, tax credits are frequently established. Business owners can get tax breaks to hire more people to work on research projects or make their facilities more accessible to people with disabilities.

Who Should File an IRS Form 3800?

If your company qualifies for a tax credit and wants to claim it, you must file Form 3800. To claim a tax credit for a business activity, you must conduct that activity (such as making a purchase, making an investment, or earning money) and then provide evidence of your expenditures and the outcomes of your efforts to claim the credit.

To claim a work opportunity tax credit for hiring workers in designated locations, you must fill out Form 5884 and provide proof of wages paid to eligible workers for a predetermined number of hours worked during the first year of employment. Form 3800 is where you'll eventually end up after combining all the info from all those other forms.

Tax credit caps

Tax liability determines the maximum annual amount that can be claimed in corporate tax credits (the amount of taxes you must pay for the year). Up to that maximum, the credits will be applied in the sequence specified.

General business credits gained during the year come first, followed by credits carried forward from the previous year, and finally, credits moved back to the last year. Please refer to page 2 of the Form 3800 Instructions for the exact sequence.

Transferability of Expired Tax Credits

Form 3800 can be used to carry forward unused tax credits to future years or back unused tax credits to prior years, up to the maximum permissible for that year, if the tax credits you applied for in that year exceed the maximum allowable. They should be included in Section I of the questionnaire.

Before Beginning Work On The Form 3800

Tax credits, including amounts carried back from past years (tax carrybacks) or carried forward to future years, cannot be claimed until your tax liability (the amount of tax you owe for the year) has been determined (carryforwards). Obtaining an estimate of your tax liability can be done using the IRS estimated tax worksheet found in Publication 505 (page 34). However, a professional tax preparer or company tax software is recommended.

Methods For Filling Out The 3800

Follow the IRS's instructions to ensure that your Form 3800 is filled out correctly and completely.

First, we'll calculate and aggregate your Part III tax credit.

• Please indicate the type of deduction you request by marking the appropriate box. Identify the credits that your small business can use to become Eligible.
• Fill out a new Section III for each credit or carry back your claim. If your credit comes from a non-passive activity, such as running a business, you should select Box A and explain the nature of the action. Suppose you have a General Business Credit carryforward (Box C). In that case, a General Business Credit carryback (Box D) or an Eligible Small Business carryforward, all of these steps apply to you (Box G).
• Each pass-through entity that contributed to your credit must file its own unique Part III, even if the recognition came from the same source.

Step 2: Calculate the current year and allowable credit

• Information from Part III must be used in Part I to detail your passive income and any tax carryovers you hope to utilize. Businesses engaging in sedentary activities may have their tax credits restricted. Thus it's essential to enter this information to find out.
• Please complete this part and attach the appropriate declaration detailing any tax credits or carryovers you intend to use.
• Using the data provided in Part I, Part II determines how much credit you can claim for the year. Here is where you will report your adjusted gross income (AGI), alternative minimum tax (AMT), and international tax credits (where applicable).

Summary

To claim company tax credits and carryovers, you must first verify that you qualify for them, keep detailed records, and file your Form 3800 and source documents accurately and in total. The computations for total possible tax credits on Form 3800 are complicated due to the form's many constraints and criteria. If you need help filling out your tax form, seeing a certified tax expert is your best bet.