CPA David Young of the New York State Society of CPA’s discussed tax relief opportunities small business owners should take advantage of Monday during News 8 at Sunrise.
The first tip was get the most out of your auto/gas deduction. “It’s mileage, and most people have that,” said Young. “You’ve just got make sure you keep track of it. Most people have mileage; maybe they do a poor job of keeping track of their mileage. I would recommend going back, looking at your calendar and tallying all of that up. Maybe use one of the apps that you have to get it in real-time, or going back and using Google to figure out how far you actually traveled to get your records actually correct.”
Standard Method: In 2017 it is 53.7 cents per business mile, plus tolls and parking.
Actual Method: Add up all actual automobile expenses including gas, repairs, oil change, car insurance, car washes, etc. and then multiply it by you business percentage (business miles/total miles for the year).
Tip #2: Get the most out of your home office deduction. “The IRS has made it pretty easy now,” Young said. “They have a new standard method that they’ll give you five dollars per square foot, but for no more than a three hundred square foot office. If you have a bedroom — maybe it’s a couple hundred square feet — you don’t have to bother keeping track of all of your utility bills anymore. Just use five dollars per square foot. It’s easy. It’s done and it’s a lot less record-keeping.”
Tip #3: Hire your children! “If you have children, and you have a business where they can actually help– they actually have to be doing a real business purpose, you can’t have a two-year-old on payroll – but let’s say their doing something for the business — could be filing or janitorial work; anything a teenager could do — you can pay that child,” explained Young. “You don’t have to pay them any payroll taxes; this is assuming you have the sole proprietorship. That child, as long as you pay them less than the standard deduction, which is about $6,300 for 2017, that child won’t have to pay any federal income tax on that.”
Tip #4: Take advantage of the Minimum Wage Tax Credit. Young said, “Here, you get a tax credit from New York State. You have to pay the minimum wage, and the child has to be between 16 and 20. When they turn 20, you’re no longer eligible for that credit. You get it for basically those teen years; maybe a high school kid or college kid, who is making the exact minimum wage. If they make one penny more than the minimum wage, you don’t get the credit. The credit’s pretty substantial at $1.35 an hour, so it’s not a bad credit for New York State.”
Tip #5: Take advantage of the Section 179 deduction. “That’s a deduction for big pieces of equipment,” said Young. “You can write off up to $510,000 worth of equipment. If you’re doing your taxes in 18, and this is for a 17-figure — and you’ve bought computers — you don’t have to depreciated them. You can just write them all off at one time. If you bought something big, it’s a one-time write-off.”
Tip #6: Keep good records. Young said keep good records about who is an employee and who is an independent contractor. Make sure to keep business and personal expenses separate.
Tip #7: NEXUS. Keep track of places where you have a physical presence to comply with state rules governing sales tax collection. If it become necessary for your small business to open a foreign bank account in order to pay vendors or others in another country, make sure that you are vigilant in following the new rules on foreign bank accounts enacted in the Foreign Account Tax Compliance Act, or FACTA.
Tip #8. Tax planning/taxed paid in. Young said make sure you’re paid in for Safe Harbor – 110 percent of the prior year tax or 90 percent of this year tax due.
For more information, visit the New York State Society of CPA’s website, click here.