Current Events

Title:Small Business Tax Issues

Author:James Scott, CPA and Kristina Dickinson, CPA

Date:February 2014

Volume:Volume 3 Issue 91

The endurance and perseverance that served us well in our military careers translates well into the business world. Veterans make great entrepreneurs and are 45% percent more likely to be self-employed than individuals with no military experience. You are so successful in fact, that the SBA, VA, and DoD, are offering entrepreneurial training to individuals transitioning from active duty to civilian life through the "Boots to Business" program.

So the good news is that we are a successful group. But, in working with hundreds of business owners, there is still something they almost universally dread; Taxes. The rules are complex and bloated. Compliance is a drain on resources and a barrier to expansion. So, what can a small business owner do to help navigate the complexity?

First, if you don't already have one, you need to find a good tax professional to work with. Get referrals from your banker or attorney. You can also find a peer reviewed accounting firm through the AICPA website.

Once you find a good professional, remember that tax matters are best dealt with in advance. The time to start planning for 2014 is now. Will your business be expanding, purchasing major capital assets or real estate? What are your long term succession and retirement plans? What states are you operating in? Many business owners are surprised at what activities can create a filing requirement and states are hungry for revenue.

Second, go to the IRS website and subscribe to their small business newsletter by clicking IRS Subscribe. This will provide direct information on tax changes and updates that apply to your business. At the end of 2013 many tax breaks expired and you need to be aware of the potential impact on your 2014 taxable income.

For example, many businesses take advantage of the section 179 deduction. In 2013, businesses could deduct 100% of the cost of new fixed assets in the year acquired up to $500,000. For 2014, that limit has been reduced to only $25,000! Other tax breaks such as the hiring credits for veterans and disabled veterans also expired.

It is possible that these breaks will be restored, retroactively, for 2014. But with the current climate of budget cuts and congressional gridlock, there is no way to be certain. Subscribing to the IRS newsletter will help to keep you up to date when and if these provisions are restored.

Third, the economy has been tough on small business owners, and many have fallen behind on their income and payroll tax obligations. If you owe less than $50,000, the IRS has an initiative called the Fresh Start program, providing individuals and small businesses a streamlined approach to an installment payment agreement. If you owe more than that, there are options for you as well that you can explore with your tax advisor. Begin the year by taking control of outstanding obligations and correspondence.

Finally, don't ignore income and property tax benefits for yourself. For example, in Virginia, 100% disabled veterans are exempt from real property taxes, regardless of assets or income. And, in Maryland, there is a $5,000 exemption on military retirement income. Talk to your tax advisor regarding benefits that may be available to you in your particular state.

Taxes are a necessary evil for all of us. Remember to tackle your tax concerns early. Find a trusted tax professional who can guide you through the complexity so you have more time to focus on running your business. If you have any questions, please feel free to contact us at Penan & Scott, P.C. 301-838-0803.

Featured Employers - view all