One Top Small Business Tax Mistake

Alexis de Tocqueville democracy and tax quote

This is an applicable quote for the small business situation described below.

What is the top small business tax mistake you see?

Unlike CPAs and other accountants and tax professionals, I do not assist small business owners with their taxes. However, I often advise small business owners on strategies that their accounts and tax professionals miss, then tell them to follow-up with their tax advisors or, better yet, find a new one. One big one that virtually all the owners I’ve worked with have overlooked is the small business health care tax credit, which many small business owners that provide health care to their workers are eligible for. Identification of their eligibility has often justified my consulting fee, although this was outside the scope of the consulting engagement!

Tax credit information, from the IRS website

From the IRS site: “For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

For tax years beginning in 2014 or later, there are changes to the credit:

  • The maximum credit increases to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
  • To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace or qualify for an exception to this requirement.

The credit is available to eligible employers for two consecutive taxable years.”

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