Getting Ready for the New Year: Tax Planning Tips for Small Business

By: Allan Thompson | Chief Operating Officer

Jet Capital presents our Getting Ready for the New Year series to provide useful information to prepare your business for the year ahead, including tax planning tips for the best tax savings. See our article with advice for planning your 2017 budget here.

While the holiday lights are twinkling and your business is navigating the end of the year rush, the time has come to start planning for taxes. There are a number of things small business owners can do now to save money on their taxes, so don’t wait to take action.

Small business tax filing can be complex and involved. Seeking professional help will help you stay organized, up-to-date on changes, and guide you to the best savings. As the new administration takes shape and assumes control in 2017, there may be revisions to the tax code. However, the rules are in place for the 2016 filing season so small business owners can plan accordingly.

Here are a few important steps to take before the end of the year for smart tax season strategy.

Check the Calendar and Make a Tax Plan

As we advised last year, now is the time to schedule a meeting with your CPA or tax professional. Not only will your tax professional know about all of the deductions your business may be able to take, they will also understand the payment schedule and requirements for filing throughout the year. Making a tax calendar for the year will take a lot of the stress out of tax planning.

Note that these tax filing deadlines, paperwork requirements, and schedules can change from year to year. For example, for employers with over 50 employees, the due date for Form 1095 - proof of insurance coverage for the Affordable Care Act has moved up to January 31st this year. This change gets the required paperwork to employees on the same schedule as their W2s. For smaller businesses, you may be eligible for tax credits if you provide medical coverage assistance to your employees. Now is the time to discuss and organize this paperwork with your tax advisor.

Depending upon the size and structure of your business, your filing deadlines may be different than your personal tax returns. S-Corporations and partnerships are required to file their tax paperwork by March 15, 2017. Meeting with your tax professional now can help you schedule paperwork and payments.

Strategize End of Year Deductions as Part of Your Tax Planning

Are there deductible purchases you could make by the end of the year? Is your business planning to make charitable contributions or donations? How are you planning on handling bonuses this year? Is your retirement planning on track for the year? All of these questions require action before the end of the year and should be incorporated into your tax planning.

Review your books with your CPA and discuss any major equipment upgrades or investments that might lead to tax savings. If your business needs to spend money on necessities, there may be a tax benefit for doing so before the end of the year. Jet Capital can help if your business needs help managing cash flow to make these purchases. A merchant cash advance could be a smart funding tool for making a purchase now so you can keep it in this calendar year for tax purposes.

We are always so proud of small businesses and their huge hearts. According to a 2015 study by Alignable, a small business social network, around 90% of small businesses plan to make charitable donations each year. Planning this giving with the tax calendar in mind can help businesses maximize both their generous charity and related tax deductions.

The IRS offers this ‘Exempt Organizations Select Check Tool’ for double-checking the status of charities to make sure they are eligible to accept charitable donations. The IRS has high standards for recordkeeping for donations, so keep track of all receipts and paperwork.

From bonuses to benefits like certain insurance and helping employees with education costs, there are many deductions business owners can take for employee compensation. Make a list of all kinds of payments and benefits you have paid to your team. Reviewing this list with your CPA or tax advisor will help you catch all the possible deductions you may take.

And as the year draws to a close, now is the time to finalize how you plan to fund your retirement funds. IRAs and SEP accounts allow you to fund for this year through April 15th. Employee contributions may need to be withheld by the end of the year. Check in with your accountant to make sure money is set aside for retirement obligations for you any matching programs you may offer to employees.

Don’t Forget Bonus Depreciation and Section 179 in Your Tax Plan

Bonus depreciation allows small business owners to deduct 50% of the costs of many improvements made to their non-residential property in 2016. Additions or expansions, elevators and escalators, and internal structural work is not included. Luckily for business owners, the list of included improvements is otherwise quite wide-ranging.

Your business may qualify for this deduction if you spent money in 2016 improving lighting, cooling or heating, updating floor coverings or woodwork, updating plumbing, installing or updating security equipment, improving or updating fire safety equipment, or making many other property improvements. Work with your tax advisor to compile a complete list of improvements and costs so your business will see the maximum tax savings.

Several kinds of equipment and improvements to your property may be deductible under Section 179 of the IRS Code. Be sure to review these deductions with your tax professional, too. The limit this year is $500,000 and there are restrictions on what kind of purchases are covered.

Jet Capital is here for your small business with smart business funding. Our strategic alternatives to a business loan are fast, flexible and designed to work with your business, especially when cash flow is challenged. For example, if your business needs help managing or planning tax payments, a merchant advance could be an effective solution.

Contact us today for more information about how a merchant cash advance could work for your small business.

Resources

Determine Your Federal Tax Obligations, https://www.sba.gov/starting-business/filing-paying-taxes/determine-your-federal-tax-obligations

Small Business Health Care Tax Credit and the SHOP Marketplace, (2016, October 20). https://www.irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace

New Survey Shows Small Business Philanthropy on the Rise. (2015, December 17). http://finance.yahoo.com/news/survey-shows-small-business-philanthropy-130000527.html

EO Select Check. (2016, December 6). IRS.gov. https://www.irs.gov/charities-non-profits/exempt-organizations-select-check

Section 179 Limit and Bonus Depreciation Changes for 2015, 2016, and Beyond Announced By IRS. https://www.nolo.com/legal-encyclopedia/irs-announces-section-179-limit-bonus-depreciation-changes-2015-beyond.html

Electing the Section 179 Deduction. IRS.gov. https://www.irs.gov/publications/p946/ch02.html


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