Sunday, August 30, 2015

Small Business Tax Planning Tips for Now

 Most self-employed people or small business owners would never list tax planning as a favorite summertime activity. Yet for those small business owners looking to enjoy a vacation in the next year and some tax-deductible outings during the summer, it makes the most sense.
“Many small business owners don't even think about their taxes until it's time to meet with their accountants and file,” said Terry Rice, owner of Terry Rice,  CPA. “It is to the small business owner’s benefit to meet at least quarterly to analyze how you can take full advantage of the provisions, credits and deductions that are legally available to you. What better time than summertime when things tend to quiet down a bit for many small businesses.”
When it comes to tax planning, Rice cites several overlapping goals that the small business owner should strive for: reducing the amount of taxable income; lowering your tax rate; controlling the time when the tax must be paid; claiming any available tax credits; and controlling the effects of the Alternative Minimum Tax; and avoiding the most common tax planning mistakes.
“Lowering taxable income is the most obvious place to start because if you can accomplish that, you can possibly lower your tax rate,” said Rice. “Three of the better areas to find additional deductions are business entertainment expenses, business auto expenses and the home office expenses.”
One often overlooked deduction for business entertainment is that the IRS allows up to 50 percent deduction of meals. Business must be discussed during that meal and a receipt of the dinner will be needed for tabs greater than $75.
Another is use of more than one personal vehicle for business use. While the 2015 mileage rate of .575 applies, you can deduct business miles from more than one automobile should you use both for business. To figure business use, divide the business miles driven by the total miles driven. This strategy can result in significant deductions.
One last key deduction is the home office, particularly if you need to buy new equipment. Section 179 expensing for tax year 2015 allows you to immediately deduct, rather than depreciate over time, up to $25,000, with a cap of $200,000 (down from $500,000 and $2,000,000, respectively, in 2014) worth of qualified business property that you purchase during the year. The key word is "purchase". Equipment can be new or used and includes certain software. All home office depreciable equipment meets the qualifications.