Year End Tax Strategies for Small Businesses

Transcription

1 Year End Tax Strategies for Small Businesses ALAMEDA COUNTY SBDC PRESENTED AT CAL STATE EAST BAY, OAKLAND NOVEMBER 8, 2017

2 Information and materials provided in this presentation is intended for reference only. As the information is designed solely to provide guidance to the participants, it is not intended to be a substitute for someone seeking personalized professional advice based on specific factual situations. Although reasonable efforts are made to ensure that the information provided is accurate, the speaker makes no warranties, expressed or implied, on the information provided. The participant accepts the information as is and assumes all responsibility for the use of such information.

3 Topics we will discuss today: Record keeping requirements 1099-MISC reporting Tax planning based accounting method Expense elections Retirement plans Tax credits

4 Record keeping requirements Last day of tax year: Odometer reading on automobiles used for business Physical inventory Inventory Fixed assets Separate business from personal expenses Copy receipts before they fade Get receipts/contracts to document all business expenses Print out all bank statements for the year if only on-line Print out all credit card statements for the year if only on-line

5 1099-MISC reporting Request for Taxpayer Identification Number and Certification (W-9) on: Landlord if have rental lease Independent contractors Attorneys (even if C or S corporation) Service providers If in the medical field of business, physicians, medical suppliers, and medical providers even if S or C Corporation

6 1099-MISC reporting 1099 threshold: $600 or more Due dates of 1096/1099-MISC: 1/31/2018 for amounts in box 7: nonemployee compensation 2/28/2018 (paper) or 4/2/2018 (electronically) for all other boxes Separate 1096s in 2017: 1099-MISC with nonemployee compensation (NEC) in box MISC for all other boxes

7 Tax planning based accounting method Cash basis of accounting Delay invoices Accelerate deductions Credit card charges Prepay Accrual basis of accounting Delay providing services/shipping products Incur additional expenditures Bad Debts

8 Expense elections De Minimis Safe Harbor annual election on tax return $2,500 per item Accounting policy IRC section 179 expense Up to $510,000 Includes portable heating and air conditioning units and computer software $2.030,000 phase-out threshold Bonus Depreciation 50% of the adjusted basis of qualifying property Can opt out of bonus depreciation

9 Expense elections California rules Conforms to De Minimis safe harbor $25,000 expense limit with $200,000 qualified asset placed-in-service threshold No bonus depreciation No computer software provision No expansion of the deduction for portable HVAC units

10 Retirement plans Simplified Employee Pension (SEP) plan All businesses Set up by due date of tax return (including extensions) Funded by: Employer only Contributions not mandatory Maximum eligibility: Age: 21 years old Service requirement: 3 of the immediately preceding 5 years Annual compensation: $600 or more Maximum annual contribution limit: Smaller of $54,000 or 25% of eligible employee compensation W-2: check box 13 for retirement plan

11 Retirement plans Savings Incentive Match Plan for Employees (SIMPLE) retirement plan All businesses with 100 or fewer employees with no other retirement plan maintained at any time during the year with at least $5,000 in compensation for the preceding year. Set up by October 1 st for existing businesses and new business established after October 1 st as soon as administratively feasible. Funded by Employer and employee Employer contributions are mandatory Maximum eligibility: $5,000 in compensation for any 2 preceding years and is expected to earn $5,000 in the current year. Maximum Annual contribution: Individual: $12,500 + $3,000 if age 50 or over Employer: Required to either match 100% up to 3% of compensation or 2% of compensation to all eligible employees Early distribution penalty increased from 10% to 25% first 2 years of beginning participation.

12 Retirement plans Other Retirement plans See IRS Publication 560

13 Tax credits Credit for small employer pension plan startup costs 50% of qualified startup costs paid or incurred during the year Limited to $500 a year for 3 years Work Opportunity Tax Credit (WOTC) U.S. Department of Labor, Employment & Training Administration State Workforce Agency CA Employment Development Department

14 Tax credits Additional Federal business credits General Business Credits Federal Form 3800 California business credits New Employment Credit Administered by Franchise Tax Board Sales & Use Tax Exemption for Manufacturing and Research & Development Administered by Board of Equalization California Competes Credit Governor s Business & Economic Development Office (GO-Biz)