UTICA — It’s tax time and there are a lot of things small business owners should keep in mind now and throughout the rest of the year so they are better prepared for the season. The first thing business owners should look at this year is expiring tax credits, says Jo Ann Golden, partner in […]
UTICA — It’s tax time and there are a lot of things small business owners should keep in mind now and throughout the rest of the year so they are better prepared for the season.
The first thing business owners should look at this year is expiring tax credits, says Jo Ann Golden, partner in charge of the Utica area at Dermody, Burke & Brown CPAs, LLC, which has offices in New Hartford. The firm is based in Syracuse.
A number of credits for alternative fuels, such as biodiesel, along with credits for Indian employment, and deductions for state and federal sales taxes all expire this year. Businesses need to make sure they take advantage of the credits they can before they’re gone, Golden says.
Companies also want to make sure they use ongoing tax credits and benefits, Golden adds.
The health-insurance tax credit, which began in 2010 and runs through 2014, can be a wonderful benefit for a small business owner, she says. Businesses with fewer than 25 low- to moderate-income employees may qualify for the credit, which goes directly to the employer to reduce income taxes, she says.
“If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save $7,500,” says Dianne Besunder, a media relations professional with the Internal Revenue Service. “If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000.”
Small businesses can also benefit from changes in how they expense their assets. Once required to depreciate the assets over time, small businesses may now be able to claim the expense in a lump sum or over a shorter period, Golden says.
One thing to keep in mind is that federal and state regulations differ on the matter, so the assets may need to depreciate differently on each return, she notes.
New businesses just starting out should take the time to talk to an adviser now, Golden says. That way, the company is set up the right way from the start, which will make filing first-year taxes easier, she says.
“There are so many compliance rules,” she says.
Good recordkeeping is essential, Golden adds.
“The better your recordkeeping at tax time, that’s a savings right there,” she says.
Keeping orderly records means a company doesn’t have to pay a tax adviser to sort out their books for them. It also helps an adviser use those records to find tax credits and other savings.
Strong records benefit the business owner throughout the year by helping them stay on top of their companies, Golden says. Business owners should reconcile their accounts, review expenses, and study their revenue sources no less than on a monthly basis, she says.
Doing that will help a business owner notice and solve problems quickly, she adds.
Seasonal businesses, in particular, should keep a keen eye on their cash flow and how they manage it so they aren’t stuck borrowing money to meet expenses in the off season, Golden says.
Owners of new and existing businesses should also take a look at the advantages of starting an Individual Retirement Account (IRA) or other retirement-savings plan, Golden says. An IRA can not only shelter an owner from paying taxes on that income, but also provides them with income in their retirement.
Finally, business owners shouldn’t be afraid to talk to professionals about any topics of concern, Golden says. They need to educate themselves, she adds.
“You’ve got to make yourself totally aware of what’s going on with your business,” she says. “Putting your head in the sand isn’t going to help you progress or be successful.”