In this month’s #PEXCardChat, we spoke with Barbara Weltman, an award-winning author and expert on small business taxes. Barbara is also a trusted small business advocate, and Publisher of Big Ideas for Small Business and Idea of the Day. Our topic of discussion was taxes and financial management for business owners. Here is the recap:
PEX Card: What are some of the big changes in taxes for small business owners this year?
Barbara Weltman: First there is an increased tax credit for small businesses paying for employee health coverage—but only if it’s bought on the exchange. There are slightly higher contribution limits for qualified retirement plans (including SEPs). Lastly, small business owners are getting an extension of various tax credits, including R&D credit and work opportunity credit.
PEX Card: What’s happening with collecting taxes on Internet sales?
Weltman: Once again the Marketplace Tax Fairness Act of 2015 has been proposed. Main Street generally favors the measure; online sellers oppose it. The measure would exempt small businesses from paying taxes on sales from the Internet (online revenue from remote sales in the prior year must be under $1 million).
PEX Card: One of the big red flags in previous years was the home office deduction. Has anything changed here?
Weltman: I don’t think it’s an audit red flag since 52% of all businesses in U.S. are home-based. There’s a simplified write-off instead of figuring actual expenses of a home office—it saves a lot of time and avoids the need for substantiation. The basic rules for home-office deduction are unchanged—regular and exclusive use is still necessary.
PEX Card: What should biz owners know about buying vs. leasing cars and the tax implications?
Weltman: Write-offs can be claimed for buying or leasing; there are limits on depreciation for buying. Owners still need to substantiate business driving of a personal vehicle. You can also use the IRS standard mileage rate for owned or leased vehicles.
PEX Card: What should a small business owner do if they get an audit notice?
Weltman: First, don’t panic! Second, determine the type of audit notice you received from the IRS. If it’s a correspondence notice, you may be able to handle it on your own (i.e. provide requested proof). If it’s an office or field audit, then call a professional immediately.
PEX Card: Which are the best retirement plans for business owners?
Weltman: It really depends on the business. Factors include: whether there are employees; how much the business can afford. Self-employed (no employees): SEPs can be set up and funded to the extended due date of the return. 401(k)s (including solo 401(k)s) optimize retirement savings.
PEX Card: What do small business owners need to know about Obamacare and their taxes for this year?
Weltman: Self-employed owners must meet the individual mandate or pay a penalty. Businesses with 50-99 employees can breathe easy this year as the employer mandate doesn’t start until 2016.
PEX Card: Any final thoughts for business owners as we approach April 15th?
Weltman: Remember to pay estimated taxes for 2015. This is separate from filing 2014 returns Review strategies for 2015 (e.g., better recordkeeping; adopting certain employee plans). Work with a tax pro throughout the year.
Thanks again to Barbara Weltman for being our guest today. Great tips for business owners! Follow her on Twitter for more advice (www.twitter.com/BarbaraWeltman).