Tax season is that time of year when many businesses struggle to get their taxes done. It’s particularly hard for newbie businesses.
You might think that since a business is small, it’s easier to do taxes. However, this isn’t always the case.
Many small businesses get caught up in all of the hoops that large corporations must jump through to get their taxes done. Starter companies usually don’t have dedicated accountants and can sometimes struggle with tax forms.
This article lists a few small business tax credits that can help you get your taxes completed and maybe even save some money in the process.
Small Business Owner: Understanding Sole Proprietorship
First, let’s look at an overarching question about filing taxes for a company: what is a sole proprietorship? A sole proprietorship is exactly what it sounds like. It’s a company that is owned and operated by a single person.
This single person is taxed as if they were an individual. A sole proprietorship can also fall into one of two categories: “new” or “existing.” There’s no difference between the two, except for when you start your business.
If you’re starting a new business, then it’s “new,” and if you’re buying an existing business, it’s “existing.” The general rule of thumb for sole proprietorships is that they only need to file a Schedule C. With that said, here are some common small business tax credits:
Work Opportunity Credit
The Work Opportunity Credit is meant to help businesses hire employees who are members of a class that the government has determined to be disadvantaged. There are four classes under this credit: ex-felons, vocational rehabilitation referrals, qualified summer youth employees, and certain TANF recipients.
The full amount of your credit over the first forty percent of wages paid will depend on the classification.
Health Care Tax Credit
This credit applies to small businesses that have less than 25 full-time employees or equivalents. This credit applies to health insurance premiums paid by the employer and is equal to a percentage of employer-paid premiums (up to 35%).
To get more information on this tax credit, there’s a great list put together by the instructions for Form 8941.
Paid Family and Medical Leave Tax Credit
The Paid Family and Medical Leave Tax Credit o help businesses that offer at least two weeks of paid family and medical leave to their employees. This credit can vary from 12% to 25% of the qualifying wages you pay. To see more information on this tax credit, check out Form 8994.
Take Advantage of Small Business Tax Credits
Essentially, small business tax credits are designed to help you out. So many small businesses struggle to stay afloat. Thankfully, these credits provide a bit of relief.
If this content was helpful, continue reading our website to find other business-related topics.