Tax Tips for Small Business
With Valentine’s Day now in the rear-view mirror, that means taxes are about to come due. The deadline for filing income taxes for 2016 is Monday, April 17, 2017, since April 15th falls during the weekend again this year. However, not all dates for all filers are the same.
For example, Business News Daily reports the due date for C-Corporations (Form 1120) was pushed back a month – from mid-March to mid-April, while the due dates for Partnerships (Form 1120) and S-Corporations (Form 1120-S) have been pushed up – from April 15 to March 15. Small business owners who won’t be able to complete their filings by the due date need to ask for an extension (and make their estimated tax payment) by the appropriate due date, even if they expect to be granted an extension.
Whatever your business or business type, here are a few tax tips to consider – for this year and/or future years.
It’s important you do a good job throughout the year with your record keeping. That includes saving receipts and tracking and analyzing your business expenditures. Entering expenses into a business accounting system like QuickBooks can be useful. But hiring a pro can be even better. When comparing professionals, hire one who specializes in your industry, if possible. Tax filing is complicated, so you don’t want to wait until the deadline is near to begin digging up your receipts for the past year. If you’re using a bookkeeper, accountant, and/or a tax professional, that will give you a clearer picture of your business at tax time. If you wait, you’re likely to miss out on some valuable deductions. (See ideas below.)
Don’t be among the nearly one in five business owners who mix their accounts. According to a survey and White Paper by Manta and Nav, 15.43 percent of male business owners – and 21.88 percent of female business owners – don’t have separate personal and business accounts. It’s much easier to know with certainty what expense belongs to your business (and what expenses do not) if you set up separate checking and credit card accounts.
Maximize Your Deductions
If you’re facing a choice of your mileage deduction or your actual auto expenses, it’s often better to take the mileage deduction.
The PATH Act, also known as the “Protecting Americans from Tax Hikes” Act of 2015, made Section 179 of the federal tax code permanent. It allows businesses to deduct the full purchase price of financed or leased equipment and off-the-shelf software. Business News Daily says that gives qualified businesses the option to take a full-cost deduction for used and new equipment purchases of less than $2 million instead of a series of smaller deduction over five years.
Other possible deductions are contract labor, supplies (such as cleaning supplies used by a contracted cleaning service), utilities, the Work Opportunity Tax Credit, bonus depreciation, a research and development tax credit, and the cost of insurance. Malpractice coverage and business continuation coverage are typically fully deductible.
According to the IRS, a small business may also be eligible for a health care tax credit if the business has fewer than 25 full-time equivalent employees, pays average wages of less than $52,000 a year for each full-time equivalent employee, and covers at least half of the employees’ health insurance premiums. To be eligible for the tax credit, the employer must purchase coverage through the Small Business Health Options Program (also known as the SHOP Marketplace). Talk with your accountant or tax preparer to see if your business might be eligible for any of these deductions.
If you don’t keep your accounts and equipment separate (as suggested above), keep in mind that when you use personal assets for businesses purposes (like a laptop, home office, or car), you may be entitled to a tax deduction. Again, your tax professional can provide you with guidance on the matter.
If you’re looking for guidance on your employee benefits, a CaliforniaChoice broker can help you review your current plan or discuss with you how to start a new plan for your employees. If you don’t already have a broker, we’ll help you find a local CaliforniaChoice broker to speak with about your group’s health insurance needs.