Tax time is upon us. Every year, millions of American business leave tax credits on the table. These small business tax tips can help ensure you consider some of the credits and deductions you are entitled to – and ensure that now and in the years to come you are prepped and ready for tax season.
Credits & Deductions You May Have Missed:
Business Travel
Does your business require you to be on the road? Or in the air? There are a number of deductions you can take that relate to your business travel that go beyond the standard business mileage rate of 55.5 cents per mile. Business travel expenses such as airfare, hotel stays, trade conventions, meals while traveling, and laundry / dry cleaning bills may be eligible deductions.
Employees’ Pay
Compensation that you provide to your employees is often tax deductible. This can go beyond wages to include bonuses, commissions, and paid sick or vacation leave, as well as fringe benefits such as life insurance and educational assistance plans.
Rent & Utilities
If you lease the space you use for your business, you may be able to deduct some or all of the rent paid to your landlord. In addition, your business’s utility bills such as electric, gas, water, and phone service may also be deductible.
Veterans & Other Targeted Groups
Did you hire an unemployed veteran in the last year? If so, you may be eligible for a Work Opportunity Credit. Employees who are members of other targeted groups such as qualified ex-felons or summer youth employees may also entitle you to the credit.
Insurance
Did you know that you can generally deduct your business insurance premiums? This includes insurance for your small business such as:
- workers’ compensation insurance,
- commercial property insurance,
- liability insurance,
- commercial auto insurance,
- malpractice insurance,
- employee health insurance, and
- employee life insurance.
If you provide health insurance and your business has fewer than 25 employees, you may also be eligible for the Small Business Health Care Tax Credit.
Disaster Losses
If you were a victim of a hurricane, flood or another event in a declared disaster area, you may be eligible to take a deduction on uninsured property losses your business incurred due to the disaster. Keep in mind that if your business received any disaster relief grants, those payments may be taxable.
Organization, Preparation & Filing:
As a small business owner, you may feel overwhelmed by all the tax laws, regulations, and paperwork involved in filing. And you probably already know that if you fail to comply with tax filing requirements, the penalties imposed by the IRS can be costly. The small business tax tips below can help make the tax preparation and filing process go a little bit smoother.
Maintain Records
It may seem obvious, but adequate recordkeeping not only helps you keep track of your bookkeeping and accounting, but it also can come in handy when it comes to substantiating income, expenses, and possible deductions. All tax related documentation should be stored in a safe place for at least five years. If you are ever audited by the IRS, you will be glad you have all your documentation readily available.
File Online
Many small businesses are eligible to E-File their tax returns. This quick and easy way of filing eliminates the paper from the process. If you owe, you can authorize a payment directly from your bank account. If you receive a refund, it can be directly deposited into your account.
Be Alert to Identity Theft
It’s an unfortunate fact that identity theft is a real problem today. If you receive notification from the IRS or become alerted to a possible identity theft situation, be sure to take immediate action and respond to the contact information on the notice. Possible identity theft red flags include:
- IRS records indicate you earned more than you actually did
- Multiple tax returns were filed in your name
- You get notified that your state or federal benefits are changing due to the agency receiving information about an invalid income change
If you suspect you may be a victim of identity theft, contact the IRS Identity Protection Specialized Unit at 800-908-4490.
For more information on filing taxes for your small business, or for more information regarding any of the deductions or credits mentioned here, please contact your tax professional or visit the IRS Small Business and Self-Employed Tax Center.
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