Let’s stipulate from the start that a small business should always be preparing for tax season. There should never be a time when you aren’t maintaining proper records and taking full advantage of the tax laws. When you wait until the last minute, you make the process more complicated and may discover tax benefits you let slip by in the previous year.
Nonetheless, business people are quite busy and you may find yourself only now organizing for taxes. In this article, we’ll first discuss a few general steps to take for every tax year, and then follow with specific details for 2015.
General Tax Tips
1. Unless you are specifically trained in tax planning and preparation, hire a professional — an accountant and/or tax attorney –to help with your taxes. These worthies spend great amounts of time keeping up with the complex tax laws. A professional will often discover tax breaks, credits and deductions you might have overlooked. In fact, it’s very likely your tax savings will more than repay the cost of using a pro, which, by the way, is a tax-deductible expense.
2. Stay informed about the latest changes to tax laws that affect small businesses. It’s a good idea to peruse the New York Times business section or the Wall Street Journal every weekday for the latest news from Congress and the courts about tax legislation — if it’s important, the papers will report it. They are available online at a quite reasonable (and deductible) price, as is the weekly magazine The Economist, our pick for the best financial periodical on the planet.
3. Refrain from making assumptions about pending legislation. Don’t count on some tax break being passed simply because Congress is debating it. Often, a new session of Congress enacts retroactive tax laws, like extensions of expiring breaks (see below). Your tax professional will be able to advise you on the latest status of pending legislation and ways it might affect you.
4. Identify sources of funding if you think you’ll need to pay a significant tax bill. For example, line up a commercial loan to help pay your taxes without dipping into your working capital. You don’t want to forgo inventory purchases because you need the money to pay taxes. Contact IOU Financial for full details regarding a convenient, low cost business loan.
Special Tax Concerns
There are a few important items pertaining to your 2014 tax return as well as new requirements for 2015.
Congress came through in 2014 and extended Section 179 depreciation rules, including bonus depreciation. Basically, you can immediately expense 2014 purchases of up to $500K for qualifying equipment and software. Alas, it isn’t at all clear whether these extenders will be renewed for 2015, although an important House vote is due today, Feb 4. Congress is mulling over whether to make Section 179 deductions permanent. Another provision under consideration is to cut in half the 10-year waiting period for converting a C corporation to an S. Stay posted for the latest news!
Affordable Care Act
Starting in 2015, businesses with at least 100 employees have to provide 70 percent of their full-time employees (or equivalents) with health insurance. The penalty for non-compliance is as high as $2,000 per employee. Be aware that in 2016, the minimum percentage of employees covered rises to 95 percent and the minimum number of employees drops to 50. You have to include the cost of each employee’s health coverage on Form W-2, or pay a $200 fine per employee. Consult with an accountant or insurance expert to ensure that the coverage you offer satisfies the minimum standards of the Affordable Care Act.
The states are eyeing online merchants as their next source of tax revenue. Although stalled in 2014, the so-called Marketplace Fairness Act will again be debated this year. If you gross more than $1 million a year from a virtual storefront, your state will want you to pay sales tax. This fight should be a doozy.