Important Tax Changes Affecting Your Small Business

Remote Quality Bookkeeping keeps abreast f the ever-changing tax laws that you need to be aware of to ensure that your business is compliant. Here is a rundown of three 2016 IRS tax changes that will impact small to medium sized businesses:

Extended tax breaks for small businesses.

• R&D tax credits: Recently passed legislation now provides two key changes to the R&D tax credit that will significantly benefit innovative small businesses and startup companies.
  • The bill allows small businesses to take the R&D tax credit against their Alternative Minimum Tax (AMT) liability, provided that they have gross receipts of $50 million or less.
  • The legislation also permits small businesses that are still growing (less than 5 years old and $5 million in annual sales) to take the R&D tax credit against their payroll taxes — up to $250,000 for 5 years.
• Section 179 now allows businesses to deduct the cost of equipment up to $500,000, providing an excellent opportunity for business expansion.
• Bonus depreciation: Business owners can depreciate 50 percent of the cost of new equipment every year until 2019.

Slightly Reduced Mileage Rates
Business-related mileage is a tax deductible expense, if you use your vehicle for work. Simply keep a log of the miles driven for business related activity through a spreadsheet or mobile application then multiply the number of miles by the applicable standard mileage rate.

Effective January 1, 2016, the IRS slightly reduced the standard mileage rates for the use of a vehicle (including vans, pickups or panel trucks) as follows:

• 54 cents per mile for business miles driven,a decline from 57.5 cents in 2015.
• 19 cents per mile driven for medical or moving purposes, compared to 23 cents for 2015.
• 14 cents per mile driven in service of charitable organizations (based on statute).

The IRS calculates the standard mileage rate for business is based on an annual survey of the “fixed and variable costs of operating an automobile.”

Taxpayers have the option of calculating the actual costs of using their vehicle instead of the mileage rates listed above, however the IRS standard mileage rate provides a straightforward methodology that saves business owners valuable time.

New requirements for The Affordable Care Act
The Affordable Care Act offers tax breaks that can help many small businesses. However,  4% of larger firms must adhere to new requirements. Under the new rules, companies with “50 full-time equivalent employees or more to offer health insurance to full-time workers or pay a penalty starting in 2015 / 2016.”

Small businesses that employ 25 or fewer employees and cover at least 50% of premium costs, however, may qualify for assistance in the form of the Small Business Health Care Tax Credit. For more information on the changes under the Affordable Care Act, see this article.

If the topics of 1099s, W2s, 941s, 0940s and workers’ compensation audits cause you frequent headaches, you need our help to put your books in order and avoid the potential for an IRS Audit.

Contact us today to see how we can best meet your needs.