Tuesday, September 1, 2015

Recent Tax Bracket Changes Will Impact Small Business Owners

One of the most significant changes is the new tax brackets, now totaling seven. It is important that businesses are aware of their new tax bracket so that they are prepared for their upcoming tax bill.
Another notable change is the alterations to taxation on capital gains. Capital gains taxes have been expanded and, underscoring the importance of recognizing a new tax bracket,businesses are taxed for capital gains according to their tax bracket. There are also changes in how ordinary and qualified dividends are each treated for taxation.
Small businesses should also be aware of the changes to payroll (FICA) taxes. These include Social Security tax, Medicare tax and the additional Medicare tax for high-earners. The Social Security tax is 12.4 percent on income up to earnings of $118,500 and Medicare is now at 2.9 percent on all earnings. Medicare for higher-earning employees is at 0.9 percent on all income over $250,000 if married and filing jointly.
New tax rules also allow for expanded contributions to retirement accounts. In a variety of 401(k) and IRA accounts, contributions are expanded to allow more income to be invested before taxes.
“In addition to being aware of these changes, there are a lot of steps that small businesses can take to make tax preparation easier in the spring. Saving every receipt for potential deductions, for instance, can have a significant impact on the tax bill,” says Rice. “Staying organized, with careful bookkeeping, is another way to make tax time painless. We work with a lot of small businesses and it is important to think about your taxes throughout the year, not only during tax season.”