2017 Tax Tips for Small Business Owners and Service Professionals

With Tax Day approaching, we’ve pulled together some helpful information to read through before you file your business taxes, from tax deadline changes to deductions you may be able to qualify for.

Tax Deadline Changes

Business owners need to note the filing deadline changes the government has imposed this year. C-Corp filing dates will be pushed back (from March 15 last year to April 15, 2017), while Partnerships’, LLCs’ and S-Corps’ filing deadlines moved up (from April 15 last year to March 15, 2017) are moving up.” (BusinessNewsDaily.com). If you miss your deadline, you’ll have to request an extension from the IRS, although money owed is still due on tax day. For a full list of tax deadlines, refer to IRS’ Tax Calendar for Businesses & Self Employed or Quickbooks Small Business Tax Calendar.

Tax Deductions

According to a recent Bankrate.com article, small business owners and entrepreneurs sometimes forget about these 12 tax deductions:

  • Home Office
  • Office Supplies
  • Furniture
  • Other Equipment
  • Software and Subscriptions
  • Mileage
  • Travel, Meals, Entertainments and Gifts
  • Insurance Premiums
  • Retirement Contribution
  • Social Security
  • Telephone Charges
  • Child Labor

Here is some guidance around some of these deductions and a couple of others to keep in mind: 

Mileage: Regarding business mileage, they can be deducted at the mileage rate of $0.54 per mile for the 2016 tax year. Otherwise, you can deduct actual car expenses (i.e. fuel, licensing, maintenance, repairs and depreciation) as long as they are all business-related and not for personal use.

Travel, Meal & Entertainment: Business travel can be deducted at 100% while meals and entertainment expenses are at 50%. “Here’s a quick tip that many people overlook: When it comes to deducting meal expenses, the IRS draws a distinction between business entertainment and meals of convenience for an employer” (Hiscox.com). This means that if you need your techs to stay late to finish a job and you order pizzas, that cost may be fully deductible.

Social Security: “The bad news about being self-employed: You have to pay 15.3 percent of your income for social security and medicare taxes, the portions ordinarily paid by both employee and employer” (Intuit TurboTax). However, self-employed service pros are able to deduct 7.65% (the employer portion) off of their income taxes.

Looking for Work: If you’ve been out of a job and you’ve been looking for a job in the same field, you can deduct your expenses to find a job (i.e. printing resumes, driving to interviews, etc) if they exceed 2% of your gross income. 

Section 179 Deductions: If you started a business in 2016 or spent a lot in new or used business equipment, Section 179 of the IRS tax code allows you to deduct up to $500,000 in equipment expenses the year that you purchased them, instead of making deductions for depreciation over time. According to Brian Ashcraft, director at Liberty Tax Service, “Instead of using regular depreciation, which would allow small deductions over a period of five years, your business can take the full [cost of qualifying equipment] in the first year, as long as it is placed into service in the same tax year and is used more than 50 percent of the time for business” (BusinessNewsDaily.com). And now business equipment now includes off-the-shelf software, which benefits companies.

As with any deductions, there are benefits and drawbacks to taking advantage of Section 179, so be sure to do the research and see what makes sense for your business. Learn more about Section 179 deductions here.

For more tips and rules around deductions for small business owners and self-employed service pros, refer back to the Bankrate.com article. We also like this write-up from MoneyTips.com.

Tax Credits

If you are a business owner who has hired long-term unemployed individuals, including military veterans, make sure to look into the Work Opportunity Tax Credit, will can give you a “40% credit up to the first $6,000 in wages for employers who hire workers that have been out of work for at least 27 weeks “(BusinessNewsDaily.com).  

There’s also the Small Business Health Care Tax Credit, which can be 50% of your premium contributions (up to 35% for tax-exempt employers). To quality for the tax credit, you must be able to check off all the following requirements: 1) Have fewer than 25 full-time equivalent (FTE) employees, 2) Have an average employee salary of $50,000/year or less adjusted yearly for inflation, 3) Have a contribution of at least 50% of your full-time employees’ premium costs and 4) Your employees must be enrolled in coverage through the Small Business Health options Program (SHOP) Marketplace. Go to Healthcare.gov to see if your business can qualify for the tax credit and how much it could be worth.

Donations

Do you have inventory that your business is no longer using? Consider donating it and deducting it on your taxes. “Company donations, whether they’re money, supplies or property, can all be deducted, but donations of goods greater than $500 have stricter reporting rules” (FitSmallBusiness.com).

Independent Contractors vs. Employees

Some business owners hire independent contractors because they don’t have the money to pay payroll taxes and provide benefits to employees. Be sure to understand the difference between an employee and an independent contractor and the tax requirements for each because if your independent contractor meets the legal definition of an employee, you could be assessed with penalties.

Tax Penalties

Failure to file your taxes on time means you’ll be hit with penalties for not only failing to file on time, but failing to pay on time. “The minimum penalty for certain tax returns filed 60 days late or more is $205 for the 2016 tax year and the penalty to pay on time is based on the amount of tax you owe, which continues to accrue until the tax bill is paid in full” (FitSmallBusiness.com). If you do not have the money to pay your tax bill on time, it’s best to go ahead and file so you can at least avoid that penalty. Then look for programs created to help small businesses with taxes (try searching for ‘Small Business Tax Relief” for your state). 

Looking for more helpful resources on small business taxes? Check out the IRS’ Small Business and Self-Employed Tax Center and the U.S. Small Business Administration website.

Last modified: April 17, 2017

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