April 15 is the national deadline for individuals to file their personal taxes, and while Tax Day gets closer and perhaps the pressure to file becoming more intense, there are a few important things to know for filers who are self-employed small business owners. Be ready for Uncle Sam with these three tips:
- Don’t Forget About Accelerated Depreciation. Don’t forget that the Section 179 deduction is still set at a limit of $500,000 as a result of the PATH Act that was signed into law on December 18, 2015. As long as equipment and software were financed and in place by midnight on December 31, 2016, they are eligible to receive the Section 179 deduction. Also, bonus depreciation is extended through tax year 2019, so small businesses will be able to depreciate 50 percent of the cost of equipment acquired and put into service during 2016 and 2017.
- Year-End Planning is the Best Preparation. Review all business finances at least one month before the end of the year to recognize potential opportunities to minimize your tax burden. Base this on sales for the year and expected sales for the coming year. For example, it may benefit you to accelerate income from one year to the next if you foresee doing more business in the future (and entering a higher tax bracket). Likewise, you may be able to minimize tax burdens with charitable contributions, purchases of business equipment, or by increasing personal retirement contributions. Because many of these transactions come with the stipulation that it takes place before the tax year ends, you’ll need time to strategize, plan and execute accordingly.
- Real Options with a Retirement Savings Plan. In addition to personal IRA contributions, small business owners have several options for employer-sponsored retirement savings plans, including a SIMPLE IRA, SEP IRA, 401(k), or profit-sharing plan. They differ in the amount the employer and employee can contribute, in their available investment options, and the ease and expense of setting them up, among other factors. Whatever the plan, however, contributions you make for yourself and your employees may be tax deductible. Small businesses may also get a tax credit to help defray the cost of starting certain retirement plans. You generally have until the due date of your tax return in 2018 (for the 2017 tax year) to contribute funds to a retirement plan for the 2017 tax year. But some types of plans must be established before the end of this year, or earlier during this year, to get the tax deduction for 2017.
IMPORTANT DEADLINES TO REMEMBER FOR SELF-EMPLOYED INDIVIDUALS:
April 18, 2017
-Deadline to request an automatic 6-month extension, file Form 4868. Remember, you must still make an estimated tax payment by April 18.
June 15, 2017
-Deadline to make estimated tax payments for the 2nd quarter of 2017.
September 15, 2017
-Deadline to make estimated tax payments for the 3rd quarter of 2017.
-Did you request an extension? This is your final deadline to file corporate tax returns for 2016 using Forms 1120, 1120A, and 1120S.
October 16, 2017
-If you requested an extension, this is your last day to file tax returns for 2016 using Forms 1040, 1040A, and 1040EZ.
-Last day the IRS will accept an electronically filed tax return. If you miss the deadline, you will have to file by paper.
This content was contributed by Dhirein Patel, tax manager in the North American Bancard Finance Department.