Small Business Tax Saving Strategies
for the 2013 Filing Season
The Simple Stuff
• Understand Tax timing
• Get the big picture at totaltaxinsights.org
• Pay your estimated tax payments
• Have solid books
• Don’t be cheap: Capitalize on the value of tax planning often 3 to1 return
• If you cant pay still file
• Pick up all of your expenses
- Meals and entertainment
- Learning and education/Professional dues
- Mileage
- IT and Communications
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Contribute to Retirement
• 401(k)
• IRA
- Payroll Deduction IRA
- SEP
- Simple IRA
- Profit Sharing
•
** Refer to IRS Comparison Worksheet
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Planning for Retirement
• Variety of options, designed to fit your needs
- 401(k) allows flexibility; salary deferrals and/or employer contributions
- SIMPLE IRA and SIMPLE 401(k) are available only to small businesses; for
SIMPLE 401(k), employer is required to contribute
- SEP is simple, inexpensive
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Expenses: Section 179 Deduction
• Expensing provision for certain business property
• Maximum $500,000 first-year
• Most tangible personal property eligible
- Computer, office furniture, vehicles and machinery, software
• Phaseout begins at $2 million
• Limits and exceptions
• Does not have to be cash can be credit/loan
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Expenses: Bonus Depreciation
• If 179 is not enough….
• First-year bonus depreciation allowance for eligible property
• 50% deduction for property placed in service in 2013
• Property eligibility requirements
• Benefits of using bonus depreciation:
- Immediate tax relief
- Improved cash flow
- Additional reinvestment capital
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Expenses: Start-up and Organizational Costs
• Start-up Costs
- Deduction in year business
starts/succeeding years
- Can include full range of
business investigatory costs
- First $5,000 in expenses
deducted; the remaining is
amortized over 180 months
- The deduction requires an
election
• Organizational Costs
- Deduction for certain costs
in creating C or S corporation
or partnership
- $5,000 maximum
- Same rules as business
start-up costs
- Certain legal and accounting
fees
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Small Business Health Insurance Credit
• 35% of premiums paid
• Must cover > 50% of health care
• Pay at least ½ of employees health insurance
• 10 or fewer FTE – Avg Wages < $25,000
Or
• 25 or fewer FTE – Avg Wages < $50,000
• Carryback/forward
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Choose the right entity at the right time
• Sole Proprietorship
• Partnership
• Corporation
• S-Corporation
• LLC
• Sole Proprietorship – most affordable, least fees, no protections, limited tax
planning.
• Partnerships – unplanned complexity, simple as a handshake, always limited
protections for someone.
• Corporations – double taxation
• S-Corporation – most opportunity for tax planning
• LLC – Simple to set-up, provides protection
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Home Office Deduction
• Simplified
• $5 per square foot up to 300 square feet
• Interest and property taxes in addition
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State taxes
• Debt forgiveness not extended
• California state income tax rate increased
• California Enterprise Zone going away December 31, 2013.
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Tax Credit Example: Hiring Credit
• Up to $37,440 per eligible employee over a 5-year period
• Employees can be full-time, part-time, or seasonal
• Employees must work in the Enterprise Zone at least 50% of the time
• Our sister company assists with claiming this tax credit
Caliber
4/9/2015
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Important Tax Rule: Corporation Built-in Gains
• No net built-in gains tax on certain property
• If sold more than 5 years after conversion from
C corporation to S corporation
• Special rule for 2011 – normally 10 years
• Reduced taxes and additional
investment capital
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Planning for Net Operating Losses
• NOL deduction available when current year’s income is less than
current year’s deductions
• NOLs can be carried back 2 years and forward 20
• Planning required to maximize deduction
• NOL versus Section 179 deduction
• NOL versus bonus depreciation
• Many businesses have large NOLs generated during economic downturn.
Proper planning will insure best tax result so that NOL benefits are not
allowed to expire.
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Planning for Business Succession
• Critical to start now – need to have plan for unexpected events
• Significant impact if a principal owner/ partner suddenly leaves or dies
• Several strategies available to finance a smooth transition
• Sources of financing can include:
- Life insurance
- Buy-sell agreement
- Grantor trust
• Best plan should fit structure of company, personal preferences & needs
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Key Takeaways
• CPA-small business owner partnership
• CPA advice
• Year-round tax planning
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We are a full service CPA firm.
Let us know how we can help.
www.mbsaccountancy.com
(559) 421-7033
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