There are plenty of fun activities a business owner gets to be involved with like finding cool new products and coming up with catchy marketing campaigns. And then there are taxes — boring and tedious, but just as important to the long-term success of the business.
If there was ever a cause for procrastination, it would certainly be taxes. When the filing deadline looms, there are many small businesses that just dig out a shoebox full of receipts that they’ve ignored the rest of the year. Waiting until you’re preparing your return to start tax planning can be a costly mistake.
The misconception is that you turn your information in to their accountant and he works his magic to reduce your tax liability. With a few exceptions, such as retirement contributions, once the year is over, when it comes to minimizing your tax bill, the ship has sailed.
The most important aspect of effective tax planning is being proactive and not letting the tail wag the dog so to speak. As soon as the year is over, it’s too late to take advantage of any tax credits on which you could have capitalized. With that in mind, here are some deductions you should have on your yearly to-do list to lower your liability.
If you recently started a new business you probably incurred costs before you even opened your doors. Unfortunately, non-operational businesses can’t deduct business expenses. Instead, you must wait until you are operational and generating income. Only then can you deduct a portion of qualifying start-up costs..
One of the most beneficial provisions for small businesses and their local community is the Work Opportunity Credit, which promotes the hiring of individuals who qualify as members of target groups, including veterans, disabled people and ex-felons. If you are planning to add to your staff, you should do it before the end of the calendar year; by doing so you can receive a large refund in wages.
Healthcare is a great benefit to offer your employees — and it can benefit your business as well. Through the Small Business Health Options Program (SHOP), employers with fewer than 24 full-time-equivalent (FTE) workers can take advantage of a substantial tax credit worth up to 50% of the company’s contribution toward employees’ premium costs.
There’s more than one benefit to attending trade shows. If you’re traveling for business you can deduct some of the costs associated with the trip. Meals and entertainment are only 50% deductible, although if your trip is exclusively for business, then lodging and transportation costs are fully deductible.
Everybody likes a party, and it’s especially nice to gather everyone together to show your appreciation for a job well done. You can deduct the entire cost of a party where all employees are invited, so order up a case of Cristal champagne and book the penthouse at the Bellagio for that big company celebration. Other business parties or events that are thrown to promote the business are considered entertainment, and are therefore 50% deductible.
You’re probably not going to convince the IRS that you needed to educate your staff on smoking culture with a trip to Jamaica, but you can fully write off the costs for classes and seminars that improves knowledge and skills for you and your employees. Employers who pay for non-job-related education for workers can write off a large part of a formal educational assistance program.
There’s no reason to live with an outdated website. Not only can you deduct hosting fees and the cost of your domain name, but you can also generally deduct the cost of designing and setting up your Web site as well. In some case instances, expensive web sites may need to be depreciated over three years.
And lastly, don’t think you can save a buck with the DIY approach. Not only can you deduct the fees associated with hiring an accountant to prepare your taxes, but having a second person with more knowledge and experience take a look at your books can save money and headaches, and set you on the right path for the year to follow.