2015 – 2016 IRS Tax Information for Small Business Owners

Dwelling on thoughts of taxes and the IRS may feel like anticipating doomsday for some small business owners. However, so long as you can gather the right information at the right time, there is not much to dread. Whether you have a small business or intend to someday operate a small business, you can get ahead on your taxes with these helpful tips. Learn about the types of taxes small business owners need to pay, the kinds of credits and deductions they can get, the misunderstood health care tax laws, and the potential tax reforms that may happen in the future.

Types of Taxes

There are many different types and forms of taxation that impact businesses. If you happen to own any real estate, you’ll need to pay property taxes. A business owner will also need to pay excise taxes for consumption and activities, such as for gasoline, which is often filed quarterly. The major taxes that businesses often worry about are income taxes and employment/payroll taxes. Beyond that, there is also a self-employment tax and, should you own a franchise or chain, a franchise tax. In many states, the businesses are also charged sales tax and gross receipts tax. The type and timing of tax filings and payments largely depend on the type of business you own and what state your business is in. Here are the major kinds of business structures: sole proprietorship (which is the most basic and common type of business), LLC, corporation, partnership, S corporation, and cooperative.

Tax Credits

Federal and state governments often don’t benefit in the long run if they overtax small business operators. That’s why they offer quite a few programs that will allow them to reduce their tax payments in some way. Tax credits reduce your tax liability dollar for dollar, which makes accountants and managers very happy. Many of the most common tax credits a business owner can get relate to energy consumption. They can also get benefits from hiring veterans, being ADA-compliant, and buying electric cars. In addition to federal programs, states also offer tax credits to promote certain responsible behaviors.

Tax Deductions

Tax deductions differ subtly from tax credits. Tax deductions reduce the taxable income, which can reduce the amount businesses pay, but not in a dollar-for-dollar way. Tax deductions typically include itemizing and deducting business expenses. Those business expenses must be considered both “ordinary and necessary” according to the IRS. This could include startup costs, advertising costs, storage costs, or even the use of your car (when it’s used for business). These deductions also could include the costs of business trips and networking events. If the small business in question has been robbed at any point, this can also be itemized as a deduction.

Health Care Information

Modern health care is very confusing, partially due to the changes put into place with the Affordable Care Act. However, there are tax incentives and tax credits for offering health care to your employees. Not many small business owners realize that there is a very specialized tax program in relation to the Affordable Care Act. To qualify, your business must have fewer tan 25 full-time employees, with an average salary of $50,000 or less.

Potential Tax Reforms

Taxes can be very complicated, but the prospect of impending tax reform can make the situation even more complicated. Congress continues to debate about how to collect taxes while promoting economic growth. Currently, the aim is to simplify the code, and to eliminate outdated practices, such as the death tax (or estate tax). Hopefully, future changes will make the tax code less daunting.


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