Small Business Taxes

Running a small business is hard work and the margins are often razor thin so any place where Uncle Sam is willing to cut you some slack on taxes is worth a look.

Though not everyone will qualify, the government has provided small businesses who meet certain criteria with generous incentives to hire veterans, provide day care help and offer access to healthcare.

As always, check with a certified public accountant when dealing with tax matters.

That said, here are four tax issues that you will want to ask you CPA about if you qualify:

Work Opportunity Tax Credit For Hiring Veterans
Hiring veterans makes a lot of sense at many small businesses. They’re often more dependable, hardworking and mature than other workers.

On top of those benefits, the government provides tax incentives for hiring unemployed veterans. To qualify, the veteran must have been unemployed for a minimum of four weeks. At that point, the business owner who hires the veteran would be eligible for a $2,400 tax credit. If the veteran has been unemployed for more than six weeks, the business owner would be eligible for a $5,600 tax credit.

There’s no upper limit to the number of veterans an employer can hire but the employees must work at least 120 hours in the first year of employment in order for the business to receive the credit.

Small Business Health Care Tax Credit
In order to qualify for this health care credit, your small business must meet these three criteria: 1) the business employs fewer than 25 full-time workers; 2) the average annual wages of the employees is less than $50,000 and 3) the business pays a uniform percentage for all employees that is equal to at least 50% of the premium cost of employee-only (not family or dependent) health care coverage.

In general, the health care coverage must be purchased through the small business health options program, or SHOP marketplace. But, there are exceptions to this requirement so please read more about this tax credit.

Credit for Employer Social Security Paid With Respect to Employee Tips
Naturally, this tax credit will be of interest to employers in the restaurant, food and beverage industries. These small businesses are often eligible for a tax credit on the Social Security and Medicare taxes paid on employees’ tip income.

To qualify, the following conditions must be met:

1. The employees of your business received tips from customers for providing, delivering or serving food or beverages for consumption
2. Your business paid or incurred Social Security and Medicare taxes on these tips.

The credit is only allowed for tips received within the food and beverage industry. Tips for other types of work are not eligible.

Credit for Employer-Provided Childcare Facilities and Services
If your business has an arrangement with a child-care facility to provide day care for the children of your employees, there’s a tax credit that may help defray those costs.

In general, this tax credit is equal to 25 percent of the qualified child care expenses with a yearly cap of $150,000.

One issue to beware of is that providing the child care by the employer may result in taxable compensation to the employee. For that reason, it’s wise to consult your tax professional when dealing with employee daycare matters at your business.

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