Six Often Overlooked Income Tax Savings

Posted on October 13, 2015

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Capture All the Possible Income Tax Savings for Your Small Business

Money 1Are you taking all of the possible tax credits for your small business? A credit is different than a deduction and makes a significant impact on your tax bill. A deduction is simply a reduction of your taxable income, but a credit reduces the amount of your tax liability. This means that if you owe $1,000 in taxes, but you have a $100 credit, your tax bill is reduced by that $100. There are many income tax savings that are overlooked by small businesses.

Tax credits are sometimes the result of a short-term law that is intended to address a particular concern of the government. They are often difficult to keep up with if you are not working with income tax savings on a regular basis. Here are a few of the most common, as discussed by the Small Business Center at Fox Business:

  1. Retirement plan start-up: If you created a defined benefit plan, such as a 401(k), SIMPLE or SEP, you can claim a credit of up to $500 for startup expenses incurred on Form 8881.
  2. Americans for Disability Act: If you have fewer than 30 employees or if your sales were below $1 million last year, you can take a tax credit for improvements made for disabled access. The maximum credit is $5,000, and you can claim 50 percent of your expenses in the improvements.
  3. Green transportation: If your business utilizes biodiesel, renewable diesel or biofuels, you may be able to take a tax credit for transportation expenses. The Family and Business Tax Cut Certainty Act allow these credits.
  4. Health insurance premiums: If you are a small company with fewer than 25 employees, and the average annual wages are less than $50,000, you may be able to take a credit. Check with your accountant to see if you qualify.
  5. Empowerment Zone: The Family and Business Tax Cut Certainty Act has made it possible for your business to receive a tax credit if your business is located in an empowerment zone. For more information and to find out if you qualify, examine IRS Form 8844.
  6. Employer Social Security and Medicare taxes: If your business is in an industry that sells beverages or food, and in which tipping is customary practice, you may be eligible for credits in the amount of Social Security and Medicare that you paid in taxes for employee tips reported to you.

Determining whether you are entitled to certain tax credits can be difficult to navigate. If you think you may be eligible for one or more of the above income tax savings for your small business, consult with your accountant.

At AccuBiz, Bert Doerhoff, CPA works with small businesses to optimize their tax return. With careful planning and addressing all areas of the business, Doerhoff strives to reduce your tax liability and maximize your credits. Give us a call at AccuBiz to discuss your tax planning as well as potential tax credits.

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Posted in: IRS