Small business owners are busy people. In the mist of a 50 to 70 hour work week, it is easy to overlook the tax credits they are entitled to. Here is a list of 5 tax credits commonly overlooked by small business:
1) Credit For Pension Plan Start Up Costs
If you implement a plan such as a 401(k), SIMPLE IRA, or SEP, you may be able to take a credit of up to $500 for startup expenses.
2) Disabled Access Credit
If you incur costs to provide access for persons with disabilities, you may enjoy a tax credit of 50% of eligible expenditures up to $5,000.
3) Tax Credit For Hiring Veterans
By hiring a vet, you may qualify to receive up to a $9,600 tax credit. Called the Work Opportunity Tax Credit (WOTC), there is a pre-screening and certification process; you must also use a formula based on wages paid, hours worked, and length of unemployment prior to hiring. You must hire the veteran before the end of 2013 to take the credit!
4) Research & Development Tax (R&D) Credit
It is estimated that only one out of twenty small businesses take advantage of this credit.
There are many misconceptions about the R&D credit, the biggest one is it is can only be claimed for inventing something new. The credit also applies for improving a product or process (cheaper, greener, etc.). It is also not just for manufacturing—computer software, architecture, engineering, architecture, etc. are all good candidates for the R&D tax credit. Self-censorship by small businesses themselves stands in the way of exploring this tax credit.
5) Fuels Tax Credits
Explore a growing list of incentives to reduce dependence on fossil fuels. You may qualify for a tax credit for use of a biodiesel or renewable diesel mixture or certain alternative fuels in your business. There is an additional benefit in that you may be able to file for these credits quarterly rather than wait until the end of the year.
Why is there a discussion of tax credits in the middle of summer? All of these credits listed above need ‘a plan of action’ by the small business owner to implement long before the end of the year.
Frankly, the same holds true for any other worthwhile tax reduction strategy for small business.
By: John J Kasperek, EA. John enjoys giving useful tips to help small businesses to thrive. Contact him to explore these or other tax saving strategies for your business.