Having a small team can be crucial for the growth and maintenance of your business but it also comes with additional challenges and stresses—like having to regularly pay other people, other than yourself. That’s why you want to maximize your tax benefits as much as possible. If you’re a small business owner with a small team, here are five tax tips to check out.
1. Take advantage of the Work Opportunity Tax Credit
When it comes to taxes, utilizing a tax credit may mean putting money back in your pocket. If you have expanded or are thinking about expanding soon, consider hiring from specific groups that qualify you for the Work Opportunity Tax Credit.
For example, if you hire a veteran or someone who has been unemployed for a while, you could qualify for the Work Opportunity Tax Credit.
2. Maximize the healthcare credit
If you have a team of fewer than 25 employees and provide healthcare benefits, you’ll want to get the most out of your healthcare credit. According to the IRS website, “The amount of the credit you receive works on a sliding scale. The smaller the employer, the bigger the credit.”
Even if you don’t owe anything this year, you may still be in luck. The IRS website offers some good news: “Even if your small business does not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.”
To get started, use Form 8941 to figure out the credit for the health care premiums.
3. Look at Section 179
You may be able to deduct certain assets under Section 179 up to the full amount in the year you purchased the item. For example, you may be able to deduct property related to manufacturing, off-the-shelf computer software, business facilities, and more. There are various rules and stipulations, so check out your eligibility. But if possible, this is something you don’t want to miss out on.
4. Utilize tax-advantaged retirement accounts
You may be able to contribute to a solo 401(k) or SEP-IRA and lower your taxable income. That way you’re saving for your future while also saving money on taxes today. If you offer retirement plans to your employees, you also may be able to save on payroll taxes as they can lower wages that are considered part of the Federal Unemployment Tax Act.
5. Carryback or carryforward
If you had a net operating loss (NOL), not all is lost. If you have a loss, you can take advantage of a carryback or carryforward. When you have a loss, you can deduct that amount from your taxes. You can put that toward previous tax years through a carryback and get a refund, or put it toward a future tax year with a carryforward.
If you have a small team, it can be tough dealing with tax time, making the budget work, and keeping your business afloat. Using these five tax tips, you can get the most out of your small business.
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Shiloh Johnson is a long-time CPA and founder of ComplYant, a technology platform offering business owners and entrepreneurs a simple way to manage tax rules and requirements.