8 Tax Filing Strategies for Small Business Owners
If you’re a business owner, then tax season can bring on a whole new set of tax-related challenges. Fortunately, there are a number of valuable tax filing strategies to maximize credits and deductions that can benefit a business owner.
The federal government levies four basic types of business taxes: income tax, self-employment tax, taxes for employers, and excise taxes. The IRS has a helpful Guide to Business Taxes that provides information on each of these taxes.
Determining what federal tax forms you need to file will depend on the form of your business. Each form of business—sole proprietorship, partnership, corporation, S corporation, and limited liability company (LLC)—has specific sets of filing rules. When it comes to state taxes, your state tax requirements will also depend on the legal structure of your business.
Many small business owners find comfort in working with a CPA or qualified tax professional. But if you feel comfortable enough to prepare your taxes on your own, there are several great filing strategies to maximize credits and deductions that you'll want to be aware of.
1. Claim the Health Care Tax Credit
You’ll want to speak to your CPA to make sure you’re eligible, but the health care tax credit can produce some savings. This credit benefits employers with fewer than 25 full-time employees that pay an average salary of less than $50,000 per year and pay at least half of employee health insurance premiums.
2. Deduct Certain Property
Known as Section 179 property, this deduction can include up to $500,000 of eligible business property. You can only deduct the full amount in the year your business began using the property, so it works well for those who have recently moved, or for business owners who acquired new property used for transportation, manufacturing, business, or research.
3. Deduct Charitable Contributions
Be sure to deduct any charitable contributions made by your business in 2015. Remember, contributions can also come in the form of volunteer expenses and stocks.
4. Pay Attention to Miscellaneous Deductions
Out of town business travel, ATM card fees for your business, and even newspapers bought to conduct your business can be used as deductions.
5. Claim the Work Opportunity Tax Credit
If your business is eligible, this credit can be beneficial to your tax filing and is available to those who hire veterans, disabled people, and other disenfranchised groups. The credit amount can vary, but in general, you can receive up to 40 percent of the first $6,000 of qualified wages paid to a new hire from one of the target groups.
6. Claim a Credit If Your Business Provides Child Care Expenses
If your business pays for your employees’ child care expenses, you can receive a tax credit. The credit is 25 percent of the expenses paid, up to $150,000 a year. In some cases, this is a better tax break for you than claiming your own child tax credit on an individual return.
7. Claim the Pension Plans Startup Cost Credit
If you’ve just started a pension plan for your employees, you may be eligible for a credit. It’s limited to $500, but that can recoup the costs of starting the plan.
8. Deduct Health Care Premiums
This doesn’t apply to group plans, but if you have an individual health plan and pay premiums out-of-pocket without a tax break, you might be able to claim those premiums as an income deduction.