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New Year, New Tax Laws: How They May Affect Your Small Business

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 Photo Credit: msjacoby via Compfight cc
Photo Credit: msjacoby via Compfight cc

by Deborah Sweeney | Featured Contributor 

Happy New Year! Hopefully you had a relaxing and calm holiday season, because January is going to be busy. Most of us still need to wrap up everything from last year, get all of our bookkeeping in order, prepare for the quarterly payment due January 15th, and then the big April tax deadline. And, with all of this extra work, it can be hard to stay on top of how taxes are actually changing this year. Luckily, 2015 shouldn’t be too shocking, but there are some adjustments that you should be aware of.

It’s now easier to save for retirement

The IRS increased the contribution limit for 401(k)s by $500 to a grand total of $18,000/yr. If you’re over 50, your catch-up contribution limit has also increased by $500 to $6,000/yr. And while this may not sound like much, an extra $500/yr over the course of your career could yield significant returns. The IRS also upped the lower-income limits for those eligible for a ‘saver’s credit’ – the amount of this credit depends on AGI and filing status. And, finally, a new type of retirement account called MyRA has been set up by the US treasury to offer those without an employer-sponsored retirement plan a way to more easily save for their golden years.

Nexus standards are being clarified or lowered

Different states have different standards for what constitutes a ‘nexus point’ – the point where a business has enough of a physical presence within a state that they should collect sales tax. 2014 was rife with nexus-related controversies, with Amazon fighting tooth and nail to keep from having to collect sales tax in the states it ships to. Because of this, a few states have either clarified or lowered their nexus point. In New York, any business doing more than $1 Million in sales to New York customers now has to collect sales tax for the state. Last year Texas forced a Utah-based computer and digital program firm to pay 8-years of sales tax after the comptroller proved ‘sufficient contact with, or activity with, the state.’ Nexus laws are broad, and are moving targets, so if you do a significant amount of sales within an outside state, meet with your accountant to ensure you’re meeting any tax-collection requirements. Even an act as innocuous as web-based advertising could be enough to establish nexus in some states.

Health insurance restrictions are harsher

The penalties for not having health insurance are set to increase in 2015. Whereas last year the penalty was the greater of either $95 or 1% of your total income, this year it has been pinned at the greater of $325 or 2% of total income. Further, as of 2015, any employer with fifty or more full-time employees must offer coverage to the company’s employees, and their dependents. If at least one full-time employee receives premium assistance after purchasing health-care on the open exchange, the employer will have to make an Employer Shared Responsibility payment.

Some deductions and credits were extended

Congress once again waited until the eleventh hour to extend over 50 tax breaks that individual filers and small businesses have enjoyed over the last few years. People are again allowed to deduct state and local sales tax, rather than just state and local income tax. Research and new market credits were approved through 2014, as were the 50% bonus depreciation and the $500,000 Section 179 limit. Now there is no telling whether or not any of these breaks will be extended through 2015, so if you can take advantage of them when filing 2014’s return, make sure you do.

2015 shouldn’t see to many radical changes to tax and business law. But it’s important to know what has, and what could, change – otherwise you might find yourself with some serious fines. As always, I strongly recommend you meet with your accountant or another tax professional to review your records from 2014, and to make sure you’ve paid what the IRS and state agencies expect. Then you can start focusing on making 2015 one of your business’s best years.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney Headshot

As CEO of MyCorporation Business Services, Inc. (MyCorporation.com), Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With her experience in the fields of corporate and intellectual property law, Deborah has evolved from lawyer to business owner. She has extensive experience in the start-up and entrepreneurial industry as she has been involved in the formation of hundreds of thousands of businesses for MyCorporation.com’s customers.

Ms. Sweeney received her JD & MBA degrees from Pepperdine University. She is active in the community and loves working with students and aspiring entrepreneurs. She serves on the Board of Regents at California Lutheran University and is a founding member of Partners of Pepperdine. Deborah has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in the areas of corporate and intellectual property law. Ms. Sweeney is also well-recognized for her written work online as a contributing writer with top business and entrepreneurial blogging sites.  She is a regular contributor on Forbes, American Express, Social Media Today, and BlogHer among many others.

In her ‘free’ time, Deborah enjoys spending time with her husband and two sons, Benjamin (8) and Christopher (6). Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Follow her on Twitter @deborahsweeney and @mycorporation.

2 Replies to “New Year, New Tax Laws: How They May Affect Your Small Business”

  1. angelika

    Ms. Sweeney hello,
    Can you please explain a little more on these 2 points?
    thank you
    1- People are again allowed to deduct state and local sales tax, rather than just state and local income tax.
    People – meaning personal return? I can deduct on my personal return local sales tax? OR on business return for cost of goods?
    I’m not understanding
    thank you

    1. Deborah Sweeney

      Hi Angelika!

      Sorry about the confusion! Last December the IRS extended a provision that allowed you to itemize your State and Local sales tax on your person return, instead of just your State and Local income tax. Eight states don’t levy an income tax, so being able to take a sales tax deduction was an especially big deal for filers there.

      Unfortunately it’s an either/or situation, so you can’t deduct both! Line 5 of Schedule A has more information:

      http://www.irs.gov/pub/irs-pdf/i1040sca.pdf

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