March 2010 Archives

March 30, 2010

Health Care Reform - What Does It Mean For Small Businesses

To make sure employers play their part in ensuring more workers get health insurance coverage, the new health care law contains a combination of incentives for smaller businesses and penalties for larger businesses. Here's an overview of the main provisions that will impact businesses, as reported by Rhonda Abrams in an article in USA Today called "The good and bad in health care reform for small businesses."

Tax Credit. Small businesses with 25 or fewer employees and $50,000 or less in annual average salaries can receive a tax credit for providing health insurance for employees. For 2010 through 2013, the credit will be up to 35% of the health care premiums the company pays for its employees each tax year. The credit will go up to 50% in 2014 provided the company buys its insurance through the new small business health insurance exchanges that will begin operating in 2014.


Penalties. Starting in 2014, businesses with more than 50 employees that don't offer affordable health care options for employees would be subject to a penalty. However, according to a blog on health care reform posted by Robb Mandelbaum in the New York  Times, as bad as this may sound, it won't really affect many businesses because "Ninety-six percent of businesses in the country with more than 50 employees offer health insurance (according to the Kaiser Family Foundation). . . .And 95 percent of the 28 million small businesses in America have fewer than 50 employees."


Health Care Exchanges. Starting in 2014, Small Business Health Options Programs - or SHOP exchanges - will be established. Through these exchanges, small companies with 100 or fewer employees will be able to pool their resources so they have greater buying power. This could result in tremendous savings for these small businesses. Also acording to Robb Mandelbaum of the New York Times, supporters of health care reform legislation predict that health costs for small businesses will drop by 20 to 30% and the current inequity between what small and big businesses pay for health care will be lessened.

March 24, 2010

New Tax Benefits for Small Businesses Under the HIRE Act

There are three significant tax breaks for small businesses in the Hiring Incentives to Restore Employment (HIRE) Act signed into law this week. 

Payroll tax credit: Under the Act, businesses do not have to pay their share of Social Security taxes (6.2%) on wages paid to qualifying new hires. Qualifying new hires include anyone hired to a new position after February 2, 2010 and before January 1, 2011 who has been unemployed for at least 60 days or only working part-time.  Workers hired to fill existing positions qualify only if the worker they are replacing left voluntarily or for cause.

Business tax credit:  For qualifying new hires, small businesses can also claim an additional general business tax credit of up to $1,000 per worker on their 2011 tax returns provided the worker stays employed for at least a year.

Section 179 deductions: The HIRE Act extends the American Recovery and Reinvestment Act provisions that allow small businesses to deduct up to $250,000 of the cost of qualifying property in the year purchased (with a phase-out for expenditures over $800,000). Without this new legislation, the Section 179 deduction was scheduled to go down to approximately $133,000 in 2010. The extended higher limits apply for any qualifying property purchased during the 2010 tax year.   


March 17, 2010

Mistakes to Avoid When Filing Your Tax Return

For many small businesses, it's taxtime. When it comes to doing your tax returns, it pays to slow down and pay attention to details. It's the small things that can cause delays with the IRS--which means a longer wait for you for any refund you are owed. Here is the IRS list of the most common errors on tax filings:

  1. Incorrect or missing Social Security Numbers. When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.

  2. Incorrect or misspelling of dependent's last name. When entering a dependent's last name on your tax return, ensure they are entered exactly as they appear on their Social Security card.

  3. Filing status errors. Make sure you choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) With Dependent Child. See Publication 501, Exemptions, Standard Deduction, and Filing Information to determine the filing status that best fits your needs.

  4. Math errors. When preparing paper returns, review all math for accuracy. Remember, when you file electronically, the software takes care of the math for you!

  5. Computation errors. Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits, and the Child and Dependent Care Credit.

  6. Incorrect bank account numbers for Direct Deposit. If you are due a refund and requested direct deposit, be sure to review the routing and account numbers for your financial institution.

  7. Forgetting to sign and date the return. An unsigned tax return is like an unsigned check - it is invalid.

  8. Incorrect Adjusted Gross Income information. Taxpayers filing electronically must sign the return electronically using a Personal Identification Number. To verify their identity, taxpayers will be prompted to enter their AGI from their originally filed 2008 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS. 

  9. Claiming the Making Work Pay Tax Credit. Taxpayers with earned income should claim the Making Work Pay Tax Credit by attaching a Schedule M, Making Work Pay and Government Retiree Credits to their 2009 Form 1040 or 1040 A. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit. The credit is worth up to $400 for individuals and $800 for married couples filing jointly. Many people who worked during 2009 are slowing down the processing of their tax return by not properly claiming this credit.


For help in developing the best tax plan for your small business, see Tax Savvy for Small Business, by Frederick Daily (Nolo).

March 13, 2010

Corporate Tax Return Deadline March 15

Don't forget, corporations have a different tax deadline than individuals. March 15 is the deadline by which most corporations must submit their corporate tax returns -- at least for corporations whose tax period is a calendar year. For corporations that use a fiscal year -- that is, a tax period other than the calendar year -- tax returns are due on the 15th day of the 3rd month after the end of the corporation's tax year. By this date, corporations must submit IRS Form 1120 or 1120A, or for S corporations, Form 1120S, or request an automatic 6-month extension of time to file (IRS Form 7004).

To learn the ins and outs of the tax code and create a comprehensive tax strategy for your small business, see Tax Savvy for Small Business, by Frederick Daily (Nolo).

March 9, 2010

Moratorium on IRS Tax Shelter Penalties for Small Business Retirement Plans

The IRS recently extended--for the second time--a moratorium on collecting penalties for failing to report certain transactions considered tax shelters by the IRS. Caught in the IRS tax shelter snare are small business owners who paid into certain retirement accounts (namely 412(i) and 419(e) plans), even though the provision was intended to go after big corporation and wealthy individuals. As reported by Margaret Collins in a recent Business Week article, the IRS moratorium will suspend penalties on individuals who received less than $100,000 in savings from the unreported transactions and under $200,000 for other taxpayers. "Some of these businesses were assessed tax penalties as high as $300,000 per year but received a tax benefit for as little as $15,000 from the transaction," according to Senator Charles Grassley, an Iowa Republican. There is proposed legislation that would make the penalty proportional to the tax benefit received.
March 6, 2010

SBA Stimulus Funds Are Running Out

Back in October we posted about the availability of new lending for small businesses. Now it appears the stimulus money is running out (a second time), because so many small businesses have taken advantage of the new loan money. The programs at stake, the 7(a) and 504 lending programs, have been popular with banks because they increased SBA guarantees up to 90% for lenders, and they've been popular with small businesses because they decreased loan fees for borrowers. According to the Wall Street Journal's article on the dwindling SBA stimulus funds, "The 90% guarantee and reduced fees have catalyzed SBA loan activity, even as conventional loans have continued to decline. According to the SBA, average weekly loan volume has increased by nearly 90% since the stimulus measures kicked in one year ago." 
You can still sign up for the SBA loan queue and possibly get a loan if a borrower fails to qualify for their loan. Go to to find out more.
March 1, 2010

Online Social Media - The New Marketing Platform

Small businesses can no longer afford to ignore the importance of online reviews, blogs, local search sites, and other social media. Word of mouth, the Yellow Pages, and other traditional marketing tools are no longer what people rely on when making decisions about where to shop, eat, or visit. As reported in an article by Kermit Pattison in the New York Times, "84 percent of Americans say online reviews influence their purchasing decisions." Don't get left behind--or worse, find out too late that you haven't properly managed your online reputation.

What to do? First, find out what is out there already, advises Pattison in "Managing an Online Reputation." Do a Google search of your business name and see what comes up. What impression would the search make on a customer? Are you easy to find? If there's not much there, list your business on local search sites like Yelp, Citysearch, and others. Then, get active and engaged in the online community. Stay on top of the online buzz with Google alerts and do your own online browsing to see what's out there and what people are saying about you and your competitors. What do people think about your product or services? Are there changes you should make to better serve your customers? Respond to reviews to show you care and listen to what people have to say.

Figure out what sites are popular in your area and learn to use others like Twitter and Facebook. Try to develop your own following and stay up to date. Finally, never, ever post fake reviews or do anything false or misleading solely to make your business look better or to harm a competitor. You could face fines from the attorney general's office or worse, ruin your hard-earned reputation.

To learn more about using online social media in your marketing efforts, see Nolo's article Increasing Traffic to Your Website.