2017 is shaping up to be an interesting year for small business owners. With a new administration coming in January, there will almost certainly be some big changes that affect the world of business in the coming months. This includes a potential shake up to the amount of taxes that small businesses and corporation pay. But before that happens entrepreneurs need to think about their current taxes and ensuring that they meet the existing deadlines.
Recently payroll provider Paychex offered some tax time reminders for small business owners as the new year approaches. As the company’s president and CEO Martin Mucci, noted, “As rules, requirements, and deadlines shift, even the most well-informed small business owner can get lost in the ever-changing world of taxes and other regulatory issues.” Similarly Michael Burdick of Forbes also recently shared some common tax mistakes that entrepreneurs tend to make. Here are some of their suggestions for what to consider when preparing for tax time:
The Affordable Care Act
Regardless of what might happen when President-elect Donald Trump takes office next year, the Affordable Care Act is still the law of the land and small businesses must ensure that they’re compliant. Part of this compliance means filing all of the required paperwork.
Applicable large employers, meaning those with more than the equivalent of 50 full-time employees, must fill out a 1095-C with detailed information about their group health care plan. Thankfully the due date for furnishing these forms has been pushed back from January 31st, 2017 to March 2nd, 2017. However forms must be filed with the IRS by February 28th unless you’re filing electronically, in which case you have until March 31st.
Mixing your personal and business expenses
If you aren’t already separating your business and personal expenses, consider this a warning. Not only are you making things harder on yourself or your accountant but you also run the risk of drawing suspicion from the IRS. Instead take the time to apply for a small business credit card and separate bank account so you’ll easily know what costs are deductible and which aren’t. In the long run this could even save you money as you could be missing items under your current system.
Did you know that you can claim a tax credit for setting up a new 401(k) plan for your employees? In order to qualify for this credit, you can have no more than 100 employees who were paid more than $5,000 during the previous year. Additionally you cannot have had a retirement plan in place during the previous three years. If you meet these requirements and set up your new plan by December 31st, be sure to submit Form 8881 with your return.
Filing an extension
Yes, if you absolutely need to, you can always file for an extension on your tax return to give you more time. However don’t fall into the trap of consistently filing extensions and putting off the inevitable — especially because it could cause you to incur penalties and interest. Plan ahead, start early, and do what you have to ensure that you aren’t rushing to meet the deadlines or missing them entirely.
Small business taxes can be complicated at times but they’re an unfortunate necessity. The new tax year is sure to bring back a handful of “classic” mistakes entrepreneurs make as well a few newer errors that may challenge even seasoned veterans. That’s why it’s always best to get a head start, work with a professional if you need help, and check your work. Good luck.