'Tis the season to pay taxes. Accountants and tax clinics have prepared themselves for a long siege to handle the onslaught of young business owners. After start-ups like myself saw the results of trying to do our taxes on our own the first year, most of us have realized we need assistance. Help is available! If you have been in business for fewer than five years, you will be interested to know that there is a wealth of information and deductions available.
Ask the IRS
The IRS has an extensive library that I have been able to make good use of. Their website has an entire section specifically for the small business owner. Yes, it is important to have an experienced professional compile your data and file your taxes for you. However, I also now know that it is equally important to understand how the system works. By knowing what chunk of money is potentially going to come out of my company and why, I can modify my habits and behavior to keep my company's hard-earned cash.
Maximize Expense Deductibles
The amount of money we are taxed is on the profit after all company expenses are paid. To determine what expenses are deductible, I pulled up Section 162 of the tax code, which defines a deductible business expense as one that is "ordinary and necessary." Other than office equipment, supplies and other obvious expenses like rent, defer to the IRS for their specific instructions on items, like some travel expenses. I am very careful that purchases do not benefit me personally outside of the business as well as expenses that appear disproportionate to the size and scope of my business.
Health Care Tax Credits
Small businesses can now get up to a 35 percent tax credit on health care coverage offered to low-to-moderate income employees. The Federal Government implemented this program to counter the current tough economic times. This program applies to the tax years 2010 to 2013. Beginning January 1, 2014, this credit will increase to 50 percent. My company can even use this credit for a prior or following year if we ended up having nothing to pay. This credit is not likely to resolve all your taxes. However, for eligible small businesses, you can still claim the deduction for business expenses so that now you have a deduction for employee premium payments.
Tax Payment Relief
The IRS knows that small businesses have been struggling to make ends meet, let alone pay taxes. Deductions help, but the remaining principle still has to get paid. My company is a young business. Just like any other company, we have to wait until our customers pay us in order to pay our obligations. By the IRS raising the ceiling before they place a lien to get paid, and by expanding payment options, small businesses have a greater opportunity to survive.