Tax Time for Small Businesses

899eeb5509f0c5479648_peggy_mchale.jpg
899eeb5509f0c5479648_peggy_mchale.jpg

Tax time is a dreaded time of the year for many people.  This year, small business owners have to adjust to new tax laws brought about in 2013.  With a number of tax changes approved as we entered the New Year, small businesses are facing a variety of new laws and regulations.  Some of these changes include higher rates on several taxes that affect small business owners, while also providing changes to credits and deductions that many small business owners find helpful.

One change that  took place immediately on January 1st, was the elimination of the two-year reduction in the payroll tax, requiring business owners to withhold  2% more from employees’ pay.  As a result of this tax increase, the 2013 FICA tax rate that employees’ pay, which is a combination of the social security tax and Medicate tax, was increased to a rate of 7.65%.  

Kate Barton, the Americas vice chairwoman for tax services at Ernst & Young also noted in a New  York Times article, that “tax rates on dividends also increased for those with high incomes, which could affect owners of businesses set up as C corporations, who often extract money from their companies as dividends instead of salary.”   Additionally, “the higher rate on dividends could make a C corporation less tax efficient than a sole proprietorship or an entity like a partnership, LLC or a subchapter S corporation, in which income ultimately accrues to the owners as individuals.”  It is important for small business owners to think through these changes and see what would be the optimal structure for their business.

Sign Up for E-News

However, it is not all bad news for business owners.  When it comes time to file 2013 tax returns, business owners will have the option to take a new home-office deduction.  This new deduction allows qualified taxpayers to deduct $5 per square foot of their home-office space, for a maximum deduction of $1,500 annually.  This new method is more direct than the current laborious tax form that requires taxpayers to calculate numerous expenses associated with their home office.  However, quick and easy may not be the best method for all.  In certain circumstances, the old laborious tax form may still be worth the effort because it can offer business owners a greater deduction.  The only way to know which way will yield the greater deduction is to calculate and compare.

Another last-minute provision that a small business can take advantage of is the Work Opportunity Credit (WOC), which is available to employers who employ workers from certain specific groups.  To take advantage of the WOC, business owners must request and obtain a certification for each employee they hire from identified target groups such as:  unemployed veterans, long-term family assistance recipient, vocational rehabilitation referrals, SNAP recipients, and  at-risk youth to a name a few.  It is important to check the rules surrounding tax changes for these and other tax credits with a tax professional.

With these changes now in place, small businesses have to take an in-depth look at their business and determine what is best. Many companies are grappling with the changes to the tax laws and are ill prepared. Becoming educated is important.  Small Business owners really need to think through their options, become informed, so that they are ready to face these new changes.  

I would like to thank Caroline Ryder for preparing this article with me.  Caroline is a Marketing Analyst with C2G Resourcing, a subsidiary of Consultants 2 Go, LLC.  Don’t forget, you can email me at Peggy@Consultants2Go.com with any questions you might have and I’ll be glad to answer them.  You can also follow me and my business on Twitter @peggymchale and @consultants2go

 

Peggy is the co-founder of Consultants 2 Go® (C2G), a consulting firm that provides marketing solutions to Fortune 500 companies in the Financial Services, Telecom, Life Sciences and other industries. Consultants 2 Go was just named to the Inc. 500/5000 List as one of the fastest growing companies in the United States. Prior to starting C2G, Peggy was a Vice President at American Express. She holds an MBA from St. John’s University and a BA from the College of Mount Saint Vincent. She recently served as a member of the Advisory Board for The Academy of Our Lady of Peace, New Providence, NJ.

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer.

TAP Into Another Town's News:

You May Also Be Interested In

Sign Up for E-News

SOMA

Of Dull Elections, Pool Waivers and Vandalism

After a historic Township Committee election in 2017 that brought us the first openly gay member of the TC, and then a split vote for mayor in which Vic DeLuca retained his post in a last-minute surprise, 2018 could prove to be the dullest campaign in years.

That’s because incumbents Nancy Adams and Greg Lembrich are running unopposed in the upcoming Democratic primary, and no one is ...

AtlantiCast

AtlantiCast: Episode 14

On this week’s AtlantiCast, an internationally recognized orthopedic oncologist takes a leadership role at Atlantic Health System, see the newest weapon in the fight against HPV-related cancers, Atlantic Health System leads the Castle Connolly / Inside Jersey Rankings, and much more!

 

South Orange Police Blotter - Three Arrests Reported

April 12, 2018

South Orange Police Blotter as of April 12

Adult Arrest - Sean Carr, a 30 year old West Orange resident, was arrested on Saturday, April 7, at approximately 10:30 a.m. for attempted auto theft. Officers responded to the Cleanway Car Wash on Irvington Avenue where employees had a subject detained (Carr) who had just tried to steal a vehicle from the car wash. Officers arrested Carr and ...

Maplewood Police Blotter - Early Morning Auto Theft Reported

March 29, 2018; Shoplifting; At approximately 11:45 p.m., a male took Red Bull from the 7-11 on Irvington Avenue and fled without paying.

March 31, 2018; Thefts from Autos; During the overnight hours an unsecured vehicle on Hillcrest Road and an unsecured vehicle on Inwood Place were entered. Electronics and other items were taken.

March 31, 2018; Auto theft; At ...

Water Main Break on Baker Street in Maplewood Wednesday Morning

April 18, 2018

MAPLEWOOD, NJ - Shortly after 5 a.m. on Wednesday, Maplewood police reported receiving a call from a commuter on his way to work who noticed a small geyser of water in front of 34 Baker St., next to the driveway to the Maplewood Country Club. 

According to Maplewood police, they requested assistance from New Jersey American Water to shut off the water, but as of 7:10 a.m., ...

South Orange and Maplewood Under Flash Flood Warning Monday Morning

SOUTH ORANGE AND MAPLEWOOD, NJ — The National Weather Service has issued a flash flood warning for the area until 11:15 a.m.

A Flash Flood Warning means that flooding is imminent or occurring.

According to the National Weather Service, excessive runoff from heavy rainfall will cause flooding of small creeks and streams, urban areas, highways, streets and underpasses as well as ...

Upcoming Events

Thu, April 19, 7:00 PM

Restaurant K at Orange Lawn Tennis Club, South Orange

Hank Zona: An Evening of Spanish Wine & Tapas

Food & Drink

Carousel_image_982bc8344531b1a37c85_par_440

Fri, April 20, 7:00 PM

Par 440 Restaurant & Lounge, Short Hills

The Extra Rich In Class Dinner Show with E.R.I.C.

Arts & Entertainment Food & Drink

Carousel_image_af1b89eae735bf536426_par440_promo

Fri, April 20, 7:00 PM

Par 440 Restaurant & Lounge, Short Hills

The Extra Rich In Class Dinner Show with E.R.I.C.

Arts & Entertainment Food & Drink

Sat, April 21, 10:00 AM

Maplewood Memorial Library, Maplewood

Spring Book Sale - Friends of Maplewood Library

Education Giving Back Other

Meet Kendra Johnson, Montclair's First African-American Superintendent

April 18, 2018

MONTCLAIR, NJ - Kendra V. Johnson, J.D., Ph.D., has been selected as Montclair’s permanent Superintendent of schools after an extensive search, the Montclair Board of Education announced at a special meeting on April 11. She is the district’s first permanent superintendent in three years, and the first African-American superintendent in its 144-year ...

Man Charged With Kidnapping and Assaulting Essex County Victim

NEWARK, NJ – A New York man appeared in federal court last week to face allegations that he assaulted and kidnapped an individual who had a protection order against him, according to U.S. Attorney Craig Carpenito.

Rudolf Szoradi, 50, is charged by four-count criminal complaint with kidnapping, transporting a stolen vehicle across state lines, interstate domestic violence and interstate ...

Atlantic Health Among Six Regional Health Systems Forming Clinical Research Consortium

April 18, 2018

PHILADELPHIA, PA - Seeking to bring clinical trials and innovations in medicine even closer to home, Atlantic Health System, parent company of Summit's Overlook Medical Center, is now part of a group of six regional health systems that are founding members of a nonprofit clinical research consortium – Partners in Innovation, Education, and Research (PIER Consortium) ...

Summit's Central Church, Willis Mission Fund Award $20,000 Grant to Bridges Outreach

SUMMIT, NJ -- Bridges Outreach has been awarded a $20,000 grant to provide case management services to individuals in Newark who are experiencing homelessness by the The Lena Willis Mission Fund of Central Presbyterian Church of Summit.

The grant will provide seven individuals with access to job readiness, internships, employment and rental assistance and ultimately, independence. Each ...

Pitch Perfect: Top 10 A Cappella Group Comes to Millburn

April 18, 2018

Millburn High graduate Samuel Dantowitz is bringing his award-winning a cappella group home for an evening of music. Northeast ICCA Champions, Upper Structure, will be holding a concert Thursday, April 19. Newark Academy's a cappella group LumeNAtion will open the show. The concert will take place in Christ Church at 7 p.m. 66 Highland Ave, Short Hills, NJ 07078. Tickets are $15 adult / $10 ...

Maplewood Philanthropist Receives Metro YMCA Award for Social Responsibility

What longtime Maplewood resident Tom Kerns remembers keenly from the four months his wife underwent radical spinal surgery and rehabilitation in 2006 is the outpouring of support from the community. People they knew — and many they didn’t — offered to make meals, drive their daughters to activities, and do whatever else the family needed, just as they’d done after ...

April is National Stress Awareness Month

National Stress Awareness Month-April 2018

Stress is a topic that people often joke about.  However, it is not a matter to be taken lightly. Stress is unfortunately one of the most common mental health issues and stress factors increasingly affect the well-being of American’s and others world-wide. According a study by the American Psychological Association, despite stress levels ...