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7 Things Your Small Business Needs to Know at Tax Time

tax timeYou probably don’t need to be reminded that it’s that time of year again. You’ve combed through your financial records, your profit and loss statement is done and you have your trusty stress ball ready to go. You’re ready for tax time.

But given the high demands of running a small business, it’s possible that some tax law considerations for 2015 weren’t on your radar. So here’s a rundown of seven things that could make a difference in your tax obligation.

1. 2015 Tax Breaks for Ohio Small Businesses

Ohio businesses have a reason to be excited this tax season (relatively speaking, of course). The state is offering a substantial tax break, and almost all small companies are eligible. In short, 75% of the first $250,000 of income can be deducted for tax year 2015. In 2016, the breaks are looking even better – small business owners can deduct 100% of that first $250,000 in earnings.

2. S-Corporation Health Insurance & Section 125

Section 125 health plans – which offer tax relief benefits for both employers and employees – have an important tax implication for 2015. If you are an S-corporation owner and employee, you are not allowed to participate in your company’s Section 125 plan. That means you are responsible for taxes on premiums paid by the company, which should be reported on the W-2.

3. Meal Deductions: 50% vs. 100%

Meal expenses are an area where many small businesses are losing money by not claiming deductions. Many firms just claim 50% across the board for these deductions, even though there are certain instances where 100% of the cost is deductible. It’s important to be familiar with these deduction types so you don’t pay more than you owe.

4. Home Office Deduction

If you’ve set up shop at home, you may be eligible for a home office deduction – another under-used deduction that many small business owners qualify for. Make sure you compare the IRS methods for calculating a home office deduction to determine which one gives you a larger benefit.

5. Maximize Retirement Fund Contributions

You can get more back in tax deductions by setting up and contributing to a small business retirement account. In a defined contribution plan, you can maximize your 2015 deductible contribution up to .25% of your compensation or $53,000. For a greater maximum contribution, you can also consider a defined benefit plan.

6. Employees vs. Independent Contractors

The IRS is cracking down on the misclassification of employees as independent contractors. Using independent contractors in your small business can be an efficient and effective way to get certain work done, and you can save on employment taxes by contracting instead of hiring someone full time. However, if contractors you’ve brought on match the IRS’s description of full-time employees, you can end up owing taxes and fines for the misclassifications. Make sure you understand the differences and classify employees and contractors appropriately.

7. Deduct Business Trip Expenses

Expenses for business trips are another cost category where you should take deductions. To make sure you are safe in the event of an audit, read up on the differences between deductible and personal business trip expenses.

Even if you keep accurate records and set aside time for tax preparations, the myriad considerations and nuances in tax laws can make doing your small business’ taxes a daunting experience.

McManamon & Co. has helped small businesses with numerous different financial situations maximize their tax benefits and meet all their requirements for filing.

For more information about how we can help your business, contact us at 440.892.8900 or visit McManamonco.com.

Tags:  , , | Posted in McManamon & Co., small business, taxes