2014 Tax Tips for Small Businesses

The IRS opened its doors to tax season on January 31st and began processing tax returns and issuing refunds. This means, tax season is in full swing, whether you’re a business owner or an individual, you’ll need to begin filing your tax return within the next 2 months.

Although there are several different tax write-offs for business owners, below are a few tax tips for small businesses that almost all business owners can qualify for.

Let’s first start with tax forms. (www.businessinsider.com)

When choosing an online or downloadable tax form, remember to select the form that is most appropriate for your business type.

• Tax Form 1065- Partnerships and multi-member LLCs

• Tax Form 1120S- S corporations file

• Tax Form 1120- C corporations need to file

• Tax Form 1040 & Schedule C- Self-employed, sole proprietors and single-member LLCs need to file

Write offs for businesses (www.IRS.gov)

For the 2013 tax season, there are three possible ways to deduct the cost of equipment (such as computers, vehicles, and machinery)

• Regular depreciation, which spreads deductions for the cost over 5, 7, or other periods fixed by law.

   

• Bonus depreciation, which allows 50% to be deducted immediately.

First-year (Section 179) deduction, which limits the first-year write off to $500,000; it can be combined with regular and bonus depreciation for an even greater deduction in 2013. (Read more about Section 179 deduction here).

Small Business Health Care Tax Credit (www.IRS.gov)

• For tax year 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

• To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year. Remember, you will have to purchase insurance through the SHOP Marketplace to be eligible for the credit for tax years 2014 and beyond.

Auto Expenses (www.nolo.com)

If you use your car for business, or your business owns its own vehicle, you can deduct some of the costs of keeping it on the road. Mastering the rules of car expense deductions can be tricky, but well worth your while. There are two methods of claiming expenses:

• Actual expense method. You keep track of and deduct all of your actual business-related expenses.

   

• Standard mileage rate method. You deduct a certain amount (the standard mileage rate) for each mile driven, plus all business-related tolls and parking fees. In 2014, the standard mileage rate is 56 cents per business mile driven. For 2013, the rate was 56.5 cents per mile.

Bad Debts (www.nolo.com)

If someone stiffs your business, the bad debt may or may not be deductible — it depends on the kind of product your business sells.

• Goods. If your business sells goods, you can deduct the cost of goods that you sell but aren’t paid for.

   

• Services. If, however, your business provides services, no deduction is allowed for time you devoted to a client or customer who doesn’t pay.

 Home Office Deduction (www.IRS.gov)

The IRS announced a new optional method to determine your home office deduction which will no longer require tracking actual expenses.

• The maximum deduction allowed under this safe harbor method is $1,500 based on 300 square feet. For most of you, tracking actual expenses will result in a higher deduction, however this is not allowed anymore.

• Read more about this deduction on the IRS’ website.

To view an entire list of tax credits available for small businesses and those who are self employed, visit the IRS website here.

By: Lauren Rockwell, a business writer and works on the marketing staff at Liberty Capital Group, Inc. She writes about the latest business trends and industry conditions, from international economics to small business funding and financing. Her blogs are intended to offer accurate and concise advice to readers.