Tax Startup Guide

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Tax time is one of the least-liked seasons for business owners, especially if you can’t afford the armies of accountants  that help save larger companies a bundle. And it’s getting more complicated  every year, even for the experts, thanks to the mounting gridlock in  Washington. Congress waited until December–almost a full year after many bits  of tax code had expired at the end of 2013–to take up the issue of  retroactively renewing these so-called tax extenders.

February 9, 2015
Author: NCH

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Since several of these  deductions and credits benefit small businesses, this delay means you’re  probably facing a lot of last-minute scrambling to figure out how much you owe;  even your tax software or accountant may be perplexed.

But all of that scrambling could be worth  it. If you pay attention to the fine print, you could have reasons to celebrate  this spring–tens of thousands of dollars’ worth of reasons, in some cases.  Between the tax extenders and incentives from the health care overhaul, look  for several other tax breaks coming out of Washington that could help your  business this season. Make sure you don’t overlook these credits and deductions  for your business taxes.

1. Boost employee benefits

Yes, they can be expensive at first. But  if you pay for employee health insurance, give transit benefits, or offer a  401(k) matching contribution, you can write off those costs. For 2014, some  small businesses can also qualify for a special health insurance credit, of up  to 50 percent of what they paid for employee health insurance premiums if those  plans were purchased through the exchanges. That credit is an incentive tied to  the Affordable Care Act, intended to increase health insurance coverage by  lowering the cost of offering it. But it’s a limited-time offer for small  businesses–good for two years, max.

2. Donate excess inventory

Donations in kind never go out of  style–giving away your unwanted merchandise can help others while alleviating  your tax bill. In-kind clearinghouses like Good360 and NAEIR make it easy to  get unwanted merchandise off your hands and to the people or nonprofits that  need it most. The tax rules are more favorable for C corporations, which can generally  write off larger amounts for donated items than the owners of S corporations  and partnerships can. If you missed the boat in 2014, plan ahead: Make any  donations by the end of this year to claim them next tax season.

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3. Help local economies

There has long been a patchwork of  incentives for doing business in troubled cities (think Detroit; Baltimore;  Gary, Indiana) and needy rural areas. If you’re located in a federally  designated empowerment zone, check out the tax benefits. The main one, assuming  the rules are extended, is a wage credit for hiring employees who live in such  zones. But make sure the credit is worth the time it takes to slog through the  paperwork, especially if you’re doing it on your own. Still, for up to $3,000  per employee in those zones, sometimes it’s worth it to jump through the hoops.

Extra Specials for Brand-New Startups

If your business launched last year, make  sure you take startup-cost deductions. The game starts as soon as you have an  idea. Even before opening the doors, you’ll probably spend on market research  or travel to meet potential customers. Under the tax rules, you can expense up  to $5,000 of those costs and amortize the rest over 15 years–a much better  deal than the standard tax treatment.

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