Let’s talk taxes, and you needn’t flinch. The subject doesn’t have to be all bad news, and isn’t.
There were some changes for the 2014 tax year that you should be aware of as you undertake your small business’ tax prep, some of which may well be to your advantage.
Here’s the good news:
- The Affordable Care Act and the Small Business Health Care Tax Credit. This credit is now available to you if have 25 or fewer full-time (or full-time equivalent) employees, pay an average wage of less than $50,000 and cover at least half the cost of your employees’ health insurance premiums.
- Last year, the maximum credit was 35% of any premiums you paid; it’s now 50%. The IRS provides plenty of information on the particulars, and here’s more about the ACA and your business.
- Another piece of good news: the standard business mileage rate changed in the 2014 tax year to 56 cents a mile. Businesses have the option of using either the standard rate or actual expenses. Your CPA can help you decide what’s best for you.
- And here’s one that will be of interest to the more experimental among you: The Department of Treasury announced that it will allow companies to file for the Research and Development Alternative Simplified Credit, or ASC, on an amended return. The ASC is a method of computing research and development tax credits. In the past, companies were allowed to take the ASC only on an original return. It’s difficult to qualify for an R&D credit, and many business owners decided it was too much paperwork to pull together without an extension to file an amended return. Now you can get that extra time.
In the wait-and-see realm:
- Small-business owners may want to keep their eyes on Washington for movement on the “tax extenders” bill that’s been stalled in Congress. The proposal would renew $85 billion for some 50 temporary tax breaks for individuals and businesses. Those breaks expired at the end of 2013; they could be extended for two years or longer.
These we’ll file in the not-so-great-news category:
- Section 179 of the Internal Revenue Code allows businesses to deduct the cost of equipment and furniture in the year it was purchased rather than spreading out the expense over the years that it’s expected to be in use. In 2013, businesses could deduct up to $500,000; in 2014, that limit plummeted to $25,000. Ouch.
- The “bonus depreciation” deduction (50% of the cost of equipment purchased and put to use throughout the tax year) is no longer available except for a select few types of property. Ask your CPA if you qualify.
- The Work Opportunity Tax Credit was a credit of up to $9,600 available to employers who hired and retained veterans and individuals who face significant barriers to employment. That expired at the end of 2013.
And think smart when filing your taxes. Make sure you know the business tax forms you’ll need (here’s a list from the IRS), and be ever on the alert for rules changes. Check with your CPA regularly, and visit the U.S. Small Business Administration to learn more about tax issues faced by small business owners.
And whatever you do, don’t hesitate to ask for help if you need it.