Small Business Tax Issues for 2017

A new year is upon us and with it comes the time to get ready for tax filing. There have been several changes in tax laws that impact small businesses recently, and with a shift to a Republican-led government in all three branches, even more changes are possible in the coming years.

But before we get ahead of ourselves, the following are some key small business tax issues to be aware of before meeting with your CPA:

Deadline Changes
The most pressing thing for current small businesses are the various deadline changes for 2017 filing:

January 31

  • Businesses that paid someone who is not their employee, such as a freelancer, subcontractor, or attorney, $600 or more for their services will need to complete and file a Form 1099-MISC on or before January 31.
  • They will also need to provide that contractor with a copy on or before January 31. This is also the deadline for employer W-2 form filing.

March 15

  • Businesses who are filing as a Partnership (Form 1065) have had their deadline brought forward from April 15 to now a March 15 deadline.
  • Businesses filing as a C-Corporation have more leeway, as theirs is the only date given an increase in time to file, being pushed back from a March 15 deadline to April 15.

$2,500 De Minimis Safe Harbor Election
A very important and impactful small business tax change  this year is the increase of the de minimis safe harbor election from $500 per item to now $2,500 per item. Making the election enables business owners to expense instead of capitalize and depreciate assets that have either a useful life of less than a year or cost less than the given dollar amount.

For example, a medical office can purchase and immediately write new waiting room furniture that costs less than $2,500. It’s important to note that this is a limit on a per item basis. That means if the business purchases twenty chairs at $300 each, they can expense all of them this tax year and write off the entire $6,000 cost.

Retirement Savings
It is never too early to talk about retirement savings with your CPA. For small business owners who are comfortable with their profitability, now is also the time to consider the tax advantages of different retirement savings vehicles. While the amount will depend on current earnings, owners can potentially contribute as much as $53,000, or  $59,000 for those over the age of 50, into tax-advantaged accounts.

The Solo 401K plan, for example, is one of the most underutilized retirement vehicles and is ideal for sole proprietors without employees. It allows sizeable tax-free contributions, which can be a tremendous boost to your retirement planning.

While these three issues — deadline changes, increased de minimis safe harbor election, and retirement savings — should be a top tax priority for small business owners this year, they are not the only aspects requiring attention. Frequent problems we see with small businesses, particularly new businesses, include incorrectly-filed payroll taxes and miscalculated deductions — both of which attract the IRS’ unwanted attention.

For these reasons and more, it is vital for small business owners to schedule an appointment with an experienced CPA before filing taxes. Even if you have a reliable bookkeeper on staff, many recent changes in tax laws can go by unnoticed. Even a simple oversight frequently results in either lost savings or notices from the IRS.

Contact us today to schedule an appointment to learn more: rsibley@abcpa.com, bbailey@abcpa.com, dchandler@abcpa.com, or cmozingo@abcpa.com!