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6 Tax-Prep Steps to Take Now

USA-TAX

The year isn't even halfway over, but that doesn't mean it's too early for businesses to be thinking about their taxes.

Jamal Ayyad, vice president of service delivery at SurePayroll, said this is the time of year when small businesses should ensure their tax situation is in order.

"When a small business owner plans for tax season strategically and consistently throughout the year, they can create a much better financial outcome for their company," Ayyad said in a statement.

SurePayroll offered six midyear tax checkup tips to help small business owners exercise greater control over their tax filings and avoid common — and costly — mistakes:

  • Take advantage of the health care credit. Small business employers with fewer than 25 full-time-equivalent employees with average wages of less than $50,800 who provide health insurance through the Small Business Health Options Program (SHOP) may be eligible for a tax credit. Starting this year, these businesses may be eligible for a maximum of 50 percent of premiums paid, with the credit limited to two consecutive years.
  • You may have options if you owe payroll taxes. Small businesses that are having trouble paying their payroll taxes may be able to take advantage of an IRS installment plan. If you owe less than $25,000 in combined tax, penalties and interest, and filed all required returns, you may be eligible.
  • Avoid retirement-plan penalties; get relief if needed. Failure to file Form 5500 by employers sponsoring retirement plans can mean fines as high as $15,000. Small business owners should make sure they are on top of this filing requirement. If, however, they were unaware and are facing a penalty, the U.S. Department of Labor has a program to reduce or eliminate penalties. Additionally, for one-participant plans, the IRS began a one-year pilot program this month to help small employers avoid the penalty.  
  • Take the simple deduction option if you work in a home office. Taking the home office tax deduction is typically filled with complicated requirements and qualifications. Recently, the IRS created a simple option that allows you to take a standard $5 per square foot of your home used for business.   
  • Keep in mind that you could pay more unemployment taxes. Some states take loans from the federal government to meet unemployment benefits liabilities. If they have not repaid those loans, there will be a reduction in the credit against the Federal Unemployment Tax Act tax rate. This means employers in those states will have to pay more. A number of states may be affected, including Arizona, Arkansas, California, Connecticut, Delaware, Indiana, Kentucky, New York, North Carolina, Ohio, Rhode Island and South Carolina, as well as the U.S. Virgin Islands.
  • Start organizing now. Organizing tax records now can make filing taxes much easier and faster later on. When small business owners get their information together well ahead of time, they greatly improve the odds of filing a complete and accurate return. Being compliant is the law, but instead of merely checking taxes off of a list of things to do at the end of the year, a savvy small business owner knows that preparation and planning ahead are key components of success.

Originally published on Business News Daily.