How Can You Use Fixed Asset Management To Beat The Tax Man At His Own Game?
Office managers all over the world are trying to strategise ways of reducing their expenditure on unnecessary overheads and expenses. One of the ways that you can reduce your tax liability is Read more
29 Tax Tips for Small Business Owners
If you’re like most business owners, there are thousands of tax questions running through your head right now, like “Which expenses are considered business and which aren’t?” or “Are there any tax credits I qualify for?” Read more
5 Tax Breaks Restaurant Owners Can Take Advantage Of
It’s the time of year, again. Tax season. Business owners and employees alike are trying to figure out how kind, or cruel, Uncle Sam is this year. Fortunately, for restaurant owners, Congress passed a handful of new laws that ease the tax burden for small business owners. Here are five tax breaks that restaurant owners can greatly benefit from, if you qualify.
Expanded Section 179 Deductions
In September, President Obama signed the Small Business Jobs Act of 2010 into law. The law doubled the amount business owners can expense on their tax return. The section 179 deductions were increased from $250,000 to $500,000 for property that was put in service in 2010 and 2011. Basically, you can write off up to half a million of new equipment expenses or anything else that qualifies as a 179 deduction.
Bonus Depreciation for Qualified Property
In addition to the increased 179 deductions, restaurant owners can also take a 100% bonus depreciation on new equipment or software placed into service between September 8, 2010 and December 31, 2011. This is part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act that Congress passed in December. This helps you recover the investment costs faster.
Tax Break for Hiring New Employees
In March, Congress passed the HIRE Act which exempts employers from paying their share of Social Security taxes on qualified employees. The exemption is only for new employees hired between February 3, 2010 and January 1, 2011. The new workers had to be unemployed or work less than 40 hours a week for 60 days prior to employment. For each new employee who falls within this category, the employer qualifies for a $1,000 tax credit per employee.
Tax Break for Leased Building Improvements
Another part of the Small Business Jobs Act allows lease holders to write off up to $250,000 in building improvements. So, if you lease your restaurant space and made any improvements, you can write off the cost.
Tax Break for Entrepreneurs
For new restaurant owners, who set up shop in 2010, the Small Business Jobs Act allows these entrepreneurs to deduct up to $10,000 in start-up expenses. This is double the amount of the previous year and is designed to encourage new business ventures.
With the government doing everything it can to create new jobs, restaurant owners are among the groups benefiting most from new tax breaks. However, talk to your accountant and make sure everything gets itemized on your tax return correctly, because you can bet the IRS is going to be keeping an eye out for anyone who tries to take advantage of the new tax incentives.
About the Author: Monica is a marketing coordinator at Food Service Warehouse, a restaurant equipment and supplies web store.
Photo Credit: the russians are here
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Five Very Last Minute Tax Tips
The following guest post from top selling author, attorney, tax and small business expert, Barbara Weltman is extremely timely for people like myself who put off taxes until the last minute. Here Barbara shares her best last minute tips for tax day.
In today’s economic environment, every financial milestone is an important one. It’s critical that small business owners have the right tools and know-how to properly manage their taxes year-round so they’re not dealing with undue stress on the days leading up to April 15th. The right solutions can help small business owners efficiently and easily manage their business’s finances and employee tax withholdings, so they can spend more time running their business. With the April 15th deadline looming, here are some things you can still do to reduce your tax bill and make the filing process a little easier.
5 Very Last Minute Tax Tips
1. Contribute to a deductible IRA or HSA. Yes, even though 2008 is over, you can put money into an IRA or health savings account (HSA) for the 2008 year (assuming you’re eligible for these accounts) and deduct the contributions on your 2008 return. You must act by April 15th. IRA contribution limits for 2008: $5,000, or $6,000 for those 50 or older on December 31, 2008. HSA contribution limits for 2008 depend on whether you have self-only coverage under a high-deductible health plan, or family coverage; those 55 or older on December 31, 2008, can add another $900.
2. Double check for carryovers. You may have forgotten tax breaks from your 2007 tax return that can be used to cut your 2008 tax bill. Look for capital loss carryovers (reported on last year’s Schedule D of Form 1040), which can be used to offset any capital gains in 2008 if you had them, plus up to $3,000 of ordinary income. Other carryover possibilities: home office deductions, charitable contributions, and net operating losses.
3. Settle up your tax bill. If you owe a small amount, pay it by check or charge it to a major credit card. While the IRS doesn’t charge a fee for paying by credit card, there’s a 2.49% convenience fee imposed by the credit card processor, so if you charge $1,000 in taxes, you’ll pay $24.90 to the processor—a hefty cost for racking up frequent flyer miles. Larger bill? If you can’t pay in full, ask the IRS for an installment agreement by filing Form 9564 This usually allows you to pay what you owe, plus interest, over the next three years.
4. File electronically. If you wait until the last minute, avoid lines at the Post Office, as well as save paper and postage, by using e-File to submit your return. Electronic filing also ensures that your return is free from math errors and has all the required information (e.g., Social Security numbers) for processing; you’ll receive an electronic acknowledgment from the IRS that the return has been accepted for filing. You may even be eligible to use FreeFile to prepare your return online and file it electronically at no cost. Bonus: If you’re owed a tax refund, you’ll get it sooner by filing electronically than you would if you send in a paper return.
5. Put your refund to work. If you’re owed money, use it to create future tax savings. You can have the IRS deposit your refund directly into an IRA, an HSA, or a Coverdell education savings account. Provide the account information (account number and routing number). Make sure the account custodian credits your refund to the correct tax year (e.g., your 2008 is applied toward your 2009 IRA contribution). You can even split your refund into two or more accounts (file Form 8888 to provide all account information.)
Caution: If you had a large refund, recognize that it amounts to an interest-free loan you made to Uncle Sam. To avoid this next year, reduce quarterly estimated tax payments related to your business income to better equal your actual tax bill for the year. Under a new rule for small business owners (more than half your income is derived from a small business and your 2008 adjusted gross income was under $500,000), you won’t be penalized for underpaying estimated taxes and you’ll improve your cash flow by pegging 2009 estimated tax payments (plus any tax withholding) at 90% or more of last year’s tax bill.
Final word. If, for any reason, you don’t want to think about taxes now, be sure to obtain an automatic six-month filing extension. File Form 4868 no later than April 15 to avoid late filing penalties. Also, if you expect to owe money, pay as much of it as you can now to minimize or avoid interest and penalties for late tax payments.
About Barbara
Barbara Weltman is a top selling author, attorney, tax and small business expert. Barbara serves as an expert on the Small Business Online Community, powered by Bank of America. She recently conducted an expert forum on the Small Business Online Community, where she answered questions about the impact of the stimulus package on small business owners. Barbara has also authored several books include “J.K. Lasser’s Small Business Taxes” and “The Complete Idiot’s Guide to Starting a Home-Based Business.”
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