Plan Now and Eliminate Tax Planning Stress
Each year taxpayers find themselves caught off-guard by poor planning and unexpected tax liabilities. Planning for taxes doesn’t have to be hard, yet tax laws are complex and it can be difficult for small business owners to navigate on their own. Changes in tax code are constant, so a quarterly conversation with your tax accountant will keep you informed and on track to make business decisions that can make the most of available deductions.
- The PATH Act made permanent expensing purchases such as equipment and computer software fully deductible in the first year, instead of being depreciated over the useful life. The deduction is up to $500,000 on purchases of less than $2 million dollars when placed into service in the same tax year and is used more than 50 percent of the time for business. The extension applies to new and used equipment. Bonus depreciation allows businesses to deduct 50 percent of the cost of new capital equipment in 2017 but will decrease to 40 percent in 2018.
Work Opportunity Tax Credit (WOTC)
- When it comes to hiring decisions, the WOTC incentivizes businesses to hire people who have been unemployed for long periods of time, including veterans. The PATH Act extended this credit through 2019 and added a 40 percent credit on the first $6,000 in wages for hiring employees who have been unemployed for at least 27 weeks.
Research & Experimentation Tax Credit
- Businesses that make less than $50 million annually and invest in research and development can take advantage of revisions to the R&D Tax Credit. Eligible small businesses can now choose to apply this credit to offset their payroll taxes. Indiana offers two tax incentives targeted at encouraging investments in research and development. Taxpayers can receive a credit against their Indiana state income tax liability calculated as a percentage of qualified research expenses. Taxpayers may also be entitled to a refund of sales tax paid on purchases of qualitied research and development equipment.
Other tax planning activities that will keep you on track include:
- A compliance check – The U.S. Department of Labor and the IRS have rules regarding independent contractors. Make sure your operations are in compliance.
- Review your document retention policies, NDAs and non-competes.
- Keep current with your home state’s tax issues – Indiana is one of a number of states that has taken a loan from the federal government to meet unemployment benefit liabilities. The loan has not been repaid and there will be a reduction in the credit against the Federal Unemployment Tax Act tax rate. Indiana employers will have to pay more.
- Make sure that hiring and employment arrangements as well as ownership records are up to date.
Investing in a relationship with a strategic tax accountant will help you make the most of tax deductions, keep you in compliance with the IRS, and keep you from making costly mistakes.