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Here are a few small business tax credits that might not have crossed your desk yet:
1. Hiring a veteran: thanks to the Work Opportunity Tax Credit (WOTC), small businesses can claim tax credits for having hired certain workers, like veterans and ex-felons.
2. Books and Magazines: many people do not realize that the IRS allows you to deduct the money that you spend on books and magazines that have to deal with your particular trade. These things are considered educational materials and will help your company overall. Therefore, you should keep track of the total amount that you spend on these things and keep a receipt if possible. This can be included in office expenses when you file your taxes.
3. ATM and Bank Fees: When doing business, you will inevitably have to pay some type of bank fee along the way. Luckily, the IRS allows you to deduct any bank or ATM fees that he have to pay. Therefore, while these expenses can seem annoying when they are incurred, they can add up to give you a nice tax break at the end of the year.
4. Health Care Tax Credit: the small business health care tax credit benefits employers that have fewer than 25 full-time equivalent employees, pay an average wage of less than $50,000 a year and pay at least half of employee health insurance premiums. To be eligible for this credit, you must have purchased coverage through the small business health options program, also known as the SHOP marketplace. Check out IRS.gov for more info.
5. Gifts: If you are a business that regularly gives gifts to clients, you should keep track of this and deduct it on your taxes. However, you want to keep in mind that the IRS only allows you to deduct a maximum of $25 for each person that you give a gift to. Many businesses will get in the habit of trying to deduct the total amount of the gift. Do not try to deduct more than $25 for each person that you give a gift to as the IRS usually looks out for this type of deduction.
6. Bad Debt: Another tax deduction that you could take for your business is writing off bad debt. If you have a client that you determine will never pay their bill, you can write off the debt. However, you can only write this off if you have already declared the income on a previous year’s tax return. Therefore, do not try to write off if you have not declared the income already.
7. Interest: As a business owner, there is a good chance that you have utilize a loan to fund part of your business. If this is the case, the interest that you pay on this loan can be deducted on your taxes. If you are in the early stages of the loan, this could amount to a very nice tax break for you.
8. Travel and Entertainment: if you conduct any travel or entertainment for your business, then you should be able to deduct the expenses. However, when doing this, you will want to make sure that you keep track of everything accurately. The expenses have to be legitimate business expenses and cannot mingle in with your personal expenses. Keep a receipt of everything that you want to deduct as it gives you a nice record of the expense.
While we’re on the subject of finances, I’d like to take this opportunity to pass along some wisdom I’ve learned from experience – your CPA is critical to your financial and overall success.
Allow me to explain: most small business owners don’t tap into their CPA’s to the extent that they could – and their business suffers as a result. Most CPA’s don’t look at the books quarterly to analyze the numbers and see how the business can run better, but they should.
Specifically, your CPA can and should organize the books so you can see and understand the business better – what’s moving and what’s not in your inventory, as well as material costs vs. labor cost breakdown, for example.
Their job should be more than just taxes. They should be giving you business intelligence that you can act on.
Further, they should be an integrated part of your team, meeting quarterly with you so you can gather intelligence and make changes if necessary.
Finally, (and I say this with love) if you’re like many of us and you haven’t done your taxes yet, get on it! They aren’t going away.
By Blair Koch
