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Small Business Tax Choices: Five Questions to Ask Now (Before Tax Day Creeps Any Closer)

publication date: Feb 17, 2017

Yes, February is here and tax filing deadlines are getting uncomfortably close. But there's still time to make some savvy tax decisions that will pay off for you and your business. Tax attorney Barbara Weltman identifies several questions you should be asking yourself (and your CPA, of course) right about now.

As a restaurant owner, you like to focus on your customers. Of course you do: It's what you're good at and what you enjoy. But if you don't spend at least a little time thinking about your taxes—probably NOT your favorite subject—you're wasting your hard-earned money. That's right: Tax and business attorney Barbara Weltman says putting in the time, thought, and effort to optimize your tax position can yield a surprisingly hefty payoff.

Tax book"The tax law provides considerable flexibility to enable small business owners to choose the options best suited to their tax situation," says Weltman, who is the spokesperson for J.K. Lasser's Small Business Taxes 2017 (Wiley, October 2016, ISBN: 978-1-119-24905-4, $22.95). "Yet far too many of them dread and avoid the subject and fail to do their homework—and in the end, their tax bill is much larger than it needs to be."

The book Weltman represents gives readers the information they need to make tax-smart decisions throughout the year. The 2017 edition features guidance on new tax updates relevant to small business owners, including: decreased standard mileage rate for business driving, expanded coverage of small business safe harbors under the "repair regulations," information reporting rules for health coverage, new penalty amounts for late filing and penalty relief rules, and guidance on how to work with a tax professional and deal with the IRS.

Here are five questions Weltman recommends you ask yourself before filing taxes:

How are you going to write off equipment purchases? There are four different rules for deducting the cost of buying equipment, office furniture, and machinery, some of which can be used in combination to write off all or most of your costs. These write-offs apply even if you financed the purchases in whole or in part.

Are you going to add money to your retirement plan? Were you profitable in 2016? You may want to shelter some of it in a qualified retirement plan. You have until the extended due date of your return to fund a plan for 2016 that was set up by the end of the year. If you didn't take action then, it's not too late. You can set up and fund a SEP plan. Factor in the cost of covering your employees and don't overlook what it can mean for your personal retirement security.

Are you going to carry a loss back or only forward? Was 2016 a bad year for your business? You may have a net operating loss that you can carry back to offset income in certain prior years. Alternatively, you can opt to forego the carryback and use the loss for up to 20 years until it is used up.

What will you pay in estimated taxes? The first installment for 2017 is due April 18, 2017. How is your year shaping up? Uncertainty about possible tax reform may affect your payment.

What will your CPA advise you to do? Of course, meet with your tax professional to understand your options. And don't squeeze him or her in between intense meetings on a jam-packed day—allow plenty of time to talk through these and other issues and make thoughtful, well-reasoned decisions.

"One final thought," says Weltman. "Watch for upcoming filing deadlines for business returns, some of which have been changed for this filing season. One key change: Partnership returns are due on March 15, 2017, which is a month earlier than in the past. However, there's now a six-month extension to September 15, 2017, if requested in a timely fashion.

"It's just smart to stay on top of the changes that happen year to year," she adds. "That's why this book and J.K. Lasser's other tax books are so popular: They simplify what can be a daunting process and help small business owners and individuals keep track of what's new, what matters most, and what to do about it right now."

The J.K. Lasser Institute also publishes several personal finance books, including Your Income Tax, 1001 Deductions & Tax Breaks, Homeowner's Tax Breaks, Year-Round Tax Planning, and more. For more information visit www.jklasser.com.