Watch Out For These New Small Business And Startup Tax Laws

As always, the landscape changes in corporate America, not necessarily because of specific trends, but rather the United States government tends to call a lot of shots, specifically related to taxes and such. That may be a good thing or a bad thing. The good news, though, is that even if it may be a ‘bad thing’ for you and your small business or startup, there are ways to prepare yourself for it to the point when it might end up being a ‘good thing’ for you. We at least hope for that….

It’s the new year here in 2014, and there are some tax laws that are new; there are also some that have been extended. It’s important you know what they are, because they might affect you, starting with a really detailed look at….

The House “Ways and Means” Committee

A lot’s going on with this committee these days — some being new, some being revisions and others that are just extensions. Most notably, there’s the permanent extension of the “section 179 deduction,” allowing companies to deduct any equipment expenses they may have.

What’s interesting about this particular extension is the revision stating that startups can now deduct up to $10K instead of $5K. That means if you have two industrial printers in your company that you use very faithfully, you can now most likely deduct on your taxes for both of those machines, rather than one.

Additionally, a new filing extension was issued, allowing the elimination or adjustment of multiple tax differences between companies sharing certain similarities, partnerships and even structures. It promotes fairness to some degree, not to mention now a small business owner may be able to claim more in tax deductions aside from equipment costs. That’s good news.

Those deductions, too, apply to just about any business aspect you can think of:

  • Advertising

  • Employee Training

  • Employee Retention

  • Business Travel

  • Legal Expenses

Even more beneficial is the added bonus with the section 179 deduction, allowing the tax law credit amount to be extended indefinitely. That simply means you, as a small business, can acquire the machinery and equipment you need without putting any dent on your own budget, totalling anywhere up to $250K in one year. There are, though, restrictions to this credit amount, such as specifically computers, relevant furniture and even company vehicles. Only the essentials, basically.

Watch Out for the Internet Sales Tax, Though….

Nothing’s actually in effect as we speak, but small businesses need to prepare for it in advance. Given the fact that many companies often will sell via online, accounting for the proposed tax would be a smart move.

Specifically, this internet sales tax comes in the form of the proposed legislation, known as the Marketplace Fairness Act, basically mandating that all businesses pay taxes for online sales of $1MM or more.

So, I repeat this important piece of advice: prepare for it in advance.

There Are Numerous Small Business Tax Cuts to Watch for as Well….

These are good things, though. You have to take action on them, however, to benefit from them. They are as follows:

  • The Small Business Jobs Act — With this legislation, you can deduct health insurance costs as a self-employed entrepreneur as well as extending accelerated bonus depreciation for about two million businesses all across the nation.

  • The Affordable Care Act — Sure, you’re now mandated to provide health insurance as a small business. This Act, though, qualifies you for a small business tax credit of up to 35% to offset that cost. In the next year, expect that credit to reach a maximum 50%.

  • The Hiring Incentives to Restore Employment (HIRE) Act — This stimulates companies to want to hire previously unemployed individuals, providing certain tax incentives on payroll and general business.

  • The R&D Tax Credit — While this particular credit had expired back in 2011, it was extended through 2013, allowing businesses to apply the credit retroactively if necessary, saving companies plenty of dollars in research and development costs.

  • Bonus Depreciation — When a small business needs to buy new equipment, it only seems fair to get some compensation for the depreciation of old equipment as a result of wear and tear. So the government, with this credit, allows for credit of 50% of the cost claimed within the first year. This credit has also been extended through 2014.

  • The Work Opportunity Tax Credit — Be sure to discuss this credit with your business lawyer or tax lawyer as well, because it might be a tremendous benefit to a business as well as the wellbeing of the war veteran community, focusing on employment for those who have served in the military. The credit’s designed to promote businesses hiring such veterans, specifically if those veterans have difficulty finding certain jobs. It’s basically a win-win situation.

You can see a trend here, though — it’s all positive. Again, however, you must prepare for it. There’s a lot to deal with in this case with all the business tax reform now going on.

So Be Sure to Consult With Your Attorney About It

You don’t want to miss any credits or benefits. You certainly don’t want to not prepare for some of the taxes you might face and then get saddled with some costs you must pay to the government. Tax time can be troublesome for any startup. Check with us to make sure the troubles turn into telltale signs of success.

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Matt Faustman is the CEO at UpCounsel. You can follow his business insights on Twitter at @upcounsel.