For many small business owners, the holiday season can be overshadowed by the unpleasant reality that the latest tax season is upon us. Yes folks, it’s time once again to answer to Uncle Sam and the IRS (Internal Revenue Service, as if you didn’t know!).
And while some SMB (small- to medium-sized business) owners are already fairly confident that they will be celebrating with a tax refund in 2014, others are wondering what they can do to increase their tax deductions, lower their tax rates, receive a tax refund and lessen their overall tax filing costs for the 2013 tax year.
Here are just some of the ways that the IRS says you as a small business owner may be able to reduce your federal income tax burden this year…
• E-Filing — To save businesses valuable time and money, the IRS is making it easier than ever before for SMBs and businesses of all shapes and sizes to file electronically. In fact, it will send you an official acknowledgement that your tax return was received within 48 hours. It’s not only fast, but safe and secure, with a 99% accuracy rate. And if you owe money, you can either authorize an electronic withdrawal or even pay by credit card.
2013 tax returns for businesses will be accepted beginning on Monday, January 13, 2014, and this applies to both electronically filed and paper-filed returns. This date does not apply to unincorporated small businesses that report their income on Form 1040 however. The start date for all Form 1040 filers is January 31, 2014, and this includes sole proprietors who file a Schedule C, landlords who file a Schedule E and farmers who file a Schedule F as well.
For a complete list of e-file options for businesses and self-employed taxpayers, we recommend E-Filing for Business and Self-Employed Taxpayers.
• Small Business Health Care Tax Credit — For tax year 2013, you as a small business owner are eligible for a credit up to as much as 35% of the premiums you paid for your employees to have health insurance this year. That percentage will increase to as much as 50% beginning in tax year 2014, so long as you are paying premiums on behalf of employees who are enrolled in a qualified health plan offered through the SHOP Marketplace established by the Patient Protection and Affordable Care Act (ACA, aka Obamacare).
And, even if you are a small business employer who did not owe tax this year, the credit can carry back or forward to other tax years. Furthermore, eligible small businesses may realize both a credit and a deduction for employee premium payments, depending on the circumstances.
Yes, we know full well it’s complicated, but nonetheless taking the time to understand more about how your small business can benefit most from the provisions set forth by the ACA is a worthwhile endeavor.
• Simplified Home Office Deduction — Beginning in tax year 2013 for returns filed in 2014, SMB owners with a home office will find the calculation and record-keeping requirements associated with an allowable deduction are simpler than ever. Highlights of the simplified option include a standard deduction of $5 per square foot of home used for business up to a maximum of 300 square feet and allowable home-related itemized deductions claimed in full on Schedule A, such as mortgage interest and real estate taxes. There is no home depreciation deduction or later recapture of depreciation for the years the simplified option is used however.
For a great overview on how the simplified option for home office deduction may work in your favor, go to Simplified Option for the Home Office Deduction on the IRS website.
• Standard Mileage Deduction — Many SMB owners work out of a home office and are on the road a lot, so knowing how they can be reimbursed on their 2013 tax return for all those miles traveled is crucial. Beginning on January 1, 2013, the standard mileage rate for use of a car for business purposes is 56.5 cents per mile, an increase of 1 cent per mile from the 2012 rate that is based on an annual study of the fixed and variable costs of operating an automobile.
• Saver’s Credit — If you’re a small business owner who by IRS standards makes a low- to moderate-income, there are incentives that may make it worth your while to save for your own retirement using a special tax credit in 2013 and the years ahead. Also known as the retirement savings contributions credit, the so-called saver’s credit helps to offset part of the first $2,000 workers voluntarily contribute to IRAs (Individual Retirement Account), their 401k plans or other workplace retirement programs — $4,000 if married and filing jointly, depending on adjusted gross income as reported on your Form 1040 or 1040A.
Eligible workers still have time to make qualifying retirement contributions and receive the saver’s credit on their 2013 tax return, and they have until April 15, 2014, to set up a new IRA or add money to an existing one for 2013.
Regardless of your income, if you’re a small business owner who wasn’t able to swing and didn’t make any contributions to your future ability to retire this year, now is the time to think about your what you can do differently now to change that in 2014.
Death and Taxes...and a New Year's Resolution
As Benjamin Franklin so famously wrote, “In this world nothing can be said to be certain, except death and taxes.” Given it ranks up there with death, paying taxes is just no fun. Nonetheless, it is inevitable. So we can only do what we can do to make it less painful, and for many small business owners that means spending some time to understand where they can save some serious money on their 2013 tax return.
If you’re a small business owner who needs to learn more about how you can lighten you tax burden for 2013, the IRS has all the information you’ll need here at http://www.irs.gov/Businesses.
Don’t let April 15, 2014, sneak up on you!
Enjoy the holidays, and if you haven’t started already, make it your New Year’s resolution starting on January 1 to get ahead of the game this year and start working on your tax credits, tax deductions and, ultimately we hope, your tax refund for 2013 just as soon as you can!