If you’re worried about this tax season, don’t be. There are numerous ways for small retailers to ease the burden, from new tax credits to already in place deductions. The following tips can save significant money this year:
1) Add Up Your Health Care Costs. Last year, the government ushered in a slew of policies as part of the new health care reform, one of the biggest being the Small Employers Health Care Tax Credit, which is applicable for tax years 2010 through 2013. “This credit is for businesses with less than 25 employees,” says Richard A. Lindsey, CPA and owner of Zevac & Lindsey, based in Mobile, AL. “The credit equals 35 percent of health care premiums paid by the company, which is a pretty big deal,” he adds. “It would be very easy to spend $5,000 to $6,000 per employee, so if you have a 35 percent credit off of $5,000, that is a $1,750 credit per employee that you will receive. The credit reduces your taxes dollar for dollar,” Lindsey notes.
2) Did You Hire Last Year? As part of the Hiring Incentives to Restore Employment (HIRE) Act, passed last March, employers who hired previously unemployed workers are eligible for the HIRE retention credit. “If you keep a formerly unemployed worker on your payroll for a year, you can apply for a credit of 6.2 percent of their wages, up to $1,000,” Lindsey says.
3) Document Recently Acquired Assets. If you bought a work related asset between Sept. 8, 2010 and Jan. 1, 2011, you’re in luck. Thanks to the Small Business Job Act, you can write-off 100 percent of your investment. “This is about bonus depreciation. You get to write-off asset costs up front, rather than over a number of years,” says Barbara Weltman, New York based small business consultant and author of, “J.K. Lasser’s Small Business Taxes 2011: Your Complete Guide to a Better Bottom Line.” Depreciation write-offs differ state to state, says Weltman. “Some don’t allow certain write-offs, so it’s always good to check your state.”
4) Remember Simple Deductions. For small business owners, everyday purchases can often get lost in the shuffle. Instead of sifting through a mountain of receipts in early April, try to identify business purchases early. This includes office supplies, even the $10 binder you picked up on your family grocery run. Make sure to itemize, as things can add up quickly. “A lot of small business owners pay for things out of their own pocket,” says Lindsey. “Make sure to keep good records between your business and personal life.” Additional overlooked deductions include insurance of any kind, rent, utilities, travel and payroll costs.
This report was adapted from a story on American Express’ Open Forum.