Midway through the year, whether you work for a small business or have small business clients, it's a good time to pauses and take stock of your tax situation. Consider these five tips provided by SurePayroll, a payroll service provider, on how to address key small business tax issues.
- Healthcare credit: Business owners with no more than 25 full-time employees whose incomes average less than $50,800 and who offer health insurance through the Small Business Health Options Program may qualify for a tax credit under the Affordable Care Act of up to 50 percent of their contribution toward premium costs and up to 35 percent if they are tax-exempt employers. Use the site's tax-credit estimator to see where you stand.
- Payroll tax debt: The IRS offers an installment plan to business owners who owe less than $25,000 in tax, interest, and penalties and who filed all their returns. (If more than $25,000 is owed, the overage has to be paid down before qualifying for the program.) The debt has to be repaid within 24 months or before the Collection Statute expiration, whichever is earlier.
- Retirement plan penalties: Business owners who sponsor retirement plans can face as much as $15,000 in penalties if they don't file Form 5500. If they are facing the fine, a Department of Labor program can help cut or eliminate penalties. Single-participant plans may avoid penalties through a one-year pilot program that the IRS began in June.
- Home office simple deduction: The IRS' new "simplified option" for a home office deduction eases the calculating and record-keeping requirements. It doesn't, though, change the criteria for who can claim this type of deduction. Of a nine-point checklist comparing the simple and regular methods, only two are the same for both. Highlights include a standard deduction of $5 per square foot (for a maximum of 300 square feet) for the portion of the home used for business and itemized deductions claimed on Schedule A only.
- Unemployment taxes could increase: If a state takes loans from the Federal Unemployment Trust Fund to pay its unemployment benefits liabilities and doesn't repay the loans by November of a two-year debt period, it becomes a credit reduction state. That means there's a credit cutback against the full tax rate. As a result, employers in those states will owe higher taxes on their Form 940. A number of states and territories may be affected, including Arizona, Arkansas, California, Connecticut, Delaware, Indiana, Kentucky, New York, North Carolina, Ohio, Rhode Island, South Carolina, and the Virgin Islands.
"It can be challenging for a small-business owner to remain compliant and stay on top of ever-changing tax laws," says Jamal Ayyad, vice president of service delivery at SurePayroll, in a prepared statement. "Especially when it comes down to the wire, and the focus is on their company's sales rather than tax season."
But when owners plan for tax season strategically and consistently yearlong, they can create a much better financial outcome for their company, he says.