With the clock ticking away, tax time will be here before we know it. It’s usually a stressful time, since most everyone has the fear that they will forget something. Thanks to some new legislation that is detailed in the video below, this year might not be so bad after all.
Katie Morell, a contributing author to OPEN Forum, created a list of deductions that many small businesses could be eligible for. The Small Business Health Care Tax Credit is the first one and is based on healthcare reform. The qualifications for this credit are:
– Must have fewer than 25 employees
– Employees must earn less than $50,000 per FTE
– Employer must pay premiums under certain "qualifying arrangements"
For businesses that this credit applies to, they could receive 35 percent of the healthcare premiums that it pays for. This credit is only redeemable until 2013.
Another way businesses could come out ahead this year is if they hired last year. Under the Hiring Incentives to Restore Employment (HIRE) Act, the HIRE retention credit is specifically geared toward businesses that hired certain qualified workers that were previously unemployed.
If this is the case, there are two tax benefits that could apply. According to the first one, the payroll tax exemption, a business could get a credit from its 6.2 percent share of social security tax on wages paid to qualifying employees from March 19, 2010 through December 31, 2010.
The second benefit states that if a business keeps an employee for a year, it could potentially get 6.2 percent of its income back, up to $1,000.
Thirdly, the Small Business Job Act gives businesses a reason to save. In the depreciation section, in particular, a business could write-off investments up to $500,000. The stipulation is that the business had to have purchased something work-related between September 8. 2010 and January 1, 2011. (Check state restrictions, since this credit could vary from state-to-state.)
Morell also mentioned that businesses should remember simple deductions. More often than not, the simple things are forgotten, which add up over time. One way businesses do this is by mixing their personal spending with business spending. Although it’s sometimes inconvenient, businesses need to develop a habit of keeping these transactions separate.
In addition, businesses should keep track of payroll costs, rent, and other utility expenses since they could also be eligible for deductions in these areas.
For more information on taxes and small businesses, visit the IRS.