Though the payroll tax increase and Medicare tax changes may leave small business owners with a headache, MyCorporation.com CEO Deborah Sweeney says it’s not all bad news this year when it comes to taxes.
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“Big things have happened already for the fiscal year that will have a huge impact on SMBs and employees both day to day and at the end of the year,” says Sweeney.
Sweeney pointed out the five things small business owners should keep in mind regarding 2012 and 2013 taxes:
No. 1: Tax Credit for Research and Experimentation
Because the legislation is constantly changing, says Sweeney, many businesses don’t know about the tax credit for qualified expenditures related to research and experiment. The “R&E” credit provides a 20% credit for investments over a certain base, or a 14% credit in excess of a base amount, according to the White House’s website.
“If you’ve done research that relates specifically to improving your business methodology, or research that generates social returns,” look into this credit, says Sweeney.
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No. 2: B-Corp Classification
B-corps is short for benefit corporation, and refers to a corporation whose primary focus is something related to “social benefits,” says Sweeney. The difference between B-corps and non-profit organizations is that the former are not limited in the same way with regard to their finances, because they can try to optimize profits and shareholder revenue.
Despite this, “there are no tax deductions specific to B-corps,” says Sweeney, adding that the laws surrounding B-corps vary from state to state.
No. 3: Deduction for Capital Equipment
Sweeney says that a major positive change for small business owners has to do with Section 179, which provides a deduction for capital equipment, including computers, hardware and manufacturing equipment, among other qualifying items.
The deduction limit has been raised to $500,000 for the 2013 tax year, and is being retroactively raised to that same limit for the 2012 tax year (originally it was only $139,000), which means that small business owners will be able to deduct more than they had previously thought.
Sweeney advises small business owners to take advantage of this deduction this year, as the future is uncertain regarding the limit.
No. 4: Startup Deduction
If you just started your business, Sweeney says to make sure you’re taking advantage of the startup deduction, which allows you to deduct qualifying costs up to $5,000. These include “any debt related to starting your business, the cost of analyzing potential markets or hiring workers, travel expenditures and securing consultants,” notes Sweeney, among other expenses.
No. 5: Deductions for Hiring Veterans or Residents of Underserved Communities
Lastly, Sweeney instructs small business owners to keep in mind that there are tax deductions for hiring veterans as well as residents of some underserved communities, which might lead you to cast a wider net for qualified candidates if you intend to hire this year.