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What to Do When You Get a Tax Credit Denial Notice

What to Do When You Get a Tax Credit Denial Notice

Imagine this: you’re a busy business owner, checking your email, and a denial notice from the Department of Revenue lands in your inbox. It can be a heart-stopping moment. But here’s the good news: tax credit denials are more common than you think, and in most cases, they’re easily resolved.

Here, we’ll break down the three most common reasons for denials and guide you through a simple 3-step process to get things back on track.

Why Do Tax Credits Get Denied?

There are three main culprits behind tax credit denials:

  1. Transcription Errors: Sometimes, a simple typo or miscalculation on your return can throw a wrench into your claim. This could be anything from claiming the wrong amount of credit to exceeding the allowable percentage of tax liability you can offset with tax credits.
  2. Missing Forms: Did you forget to attach a crucial form during the electronic filing process or is the Department of Revenue claiming they didn’t receive the forms you did submit? Believe it or not, this happens more often than you might think. The Department of Revenue may deny your claim even if the credit is legitimate, simply because they don’t have the necessary documentation even if you submitted the correct forms.
  3. Allocation Issues:  For S-corps and LLCs, claiming tax credits involves a specific workflow. The credit needs to be properly allocated at the entity level, then distributed to shareholders, and finally claimed on individual tax returns. Any misstep in this process can lead to a denial.

3 Steps to Resolve Your Denial:

  1. Review Your Return:  Take a close look at the tax return you submitted. Was the credit amount accurate? Were all the required schedules included? Identifying the discrepancy helps you understand the reason for the denial.
  2. Confirm Form Attachments:  Work with your CPA to verify that all the necessary tax credit forms were attached electronically. A tax return submission confirmation from your CPA can provide peace of mind.
  3. Resubmit and Refine: Once you’ve identified the issue and confirmed form attachments, resubmit your tax return with any necessary corrections. In our experience at MCA, 100% of client denials were resolved by resubmitting a properly filled-out return with the correct forms.  In some cases, you can even email the tax credit department at the Department of Revenue to resolve the issue without having to refile the entire tax return.

When to Seek Professional Help:

If you’ve followed these steps without resolution, it’s time to bring in the experts.  

At McMillian & Associates, we specialize in helping businesses navigate the tax credit landscape. We can help you understand the specific reason for your denial and formulate a strategy to resolve the situation.

Contact us today and let us help you navigate the path to resolution.