Mid-Year Tax Planning for Small Businesses

Summer isn’t normally when small business owners think about taxes, but now is an excellent time to take actions that can cut 2017 tax bills. The U.S. Small Business Administration recently published these five mid-year strategies businesses can take to save money.

Consult With Tax Advisors

CPAs are not only available when tax returns need to be filed. Tax professionals can help create a tax plan that can be implemented now, lowering taxes and increasing profits throughout the year.

Expand and Save

There are tax benefits for several actions that help expand a small business. For starters, up to $510,000 in equipment purchases can be expensed in 2017, even if it’s financed. When hiring, there are work opportunity credit benefits when someone from a targeted group, such as qualified veterans, is brought on board. The IRS has details on those groups and how much the credit savings can be. Setting up a qualified retirement plan will also cut taxes. There are several plans small businesses can choose from, depending on how much a business can pay and how many employees it has.

Research and Development Benefits

There are tax credits available to many small businesses that invest in R&D. Qualified small businesses can use up to $250,000 in credit to offset an employer’s share of Social Security taxes. For a business to qualify, it must have less than $5 million in gross receipts for the current year and no gross receipts for any year before the fifth year prior to the current year. R&D is not limited to pharmaceutical companies or the tech industry. Any business that wants to re-think their operations or conceptualize a new product may qualify.

Issue Stock

Retail, wholesale, technology, and manufacturing companies that are C corporations may be able to issue stock allowing shareholders to eventually qualify as tax-free for any capital gains. A stock will be tax free on capital gains once it’s held for five years. The stock, however, cannot be received as an inheritance or a gift and must be acquired for property, cash, or services.

Check Income Tax Payments

For small businesses using estimated taxes to pay income tax, estimates can be made right by September 15, 2017, or January 16, 2018. Estimated taxes include self-employment tax and the 0.9% and 3.8% respective Medicare taxes on earned income and investment income.

For more information on how your small business can save by beginning to prepare now for the 2017 tax season, contact Caroprese & Company.


Resources

  • Weltman, Barbara. “5 Mid-Year Tax Planning Strategies.” U.S. Small Business Administration. Accessed June 20, 2017.
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