When you run your own company, tax time can be frustrating. Getting documents in order takes hours out of your already busy schedule, and giving your hard-earned cash to Uncle Sam is never fun.
Not surprisingly, 60 percent of small-business owners say administrative burdens, like paperwork and confusing rules, are the worst part of filing — even more so than the financial cost of taxes, according to a recent survey by the National Small Business Association. Almost half of small-business owners file under extension, the survey found.
If you plan to file on time, the good news is, there are still lots of last-minute steps you can take before April 18 to reduce the taxes you and your business owe — possibly by thousands of dollars. And many require simply scrounging up some old receipts or bank statements.
"It's worth blocking out a little extra time to review your check register or credit card statements before you file," said Indianapolis-based accountant John Wheeler. "You might qualify for deductions, thanks to expenses you totally forgot about."
Here are some of the best entrepreneur tax moves you can make at the eleventh hour.
Did you kick off a business in 2015? Organize those receipts.
Entrepreneurs with a new company can deduct from their taxable income a full $10,000 — $5,000 for start-up expenses, like "investigating the creation of a business," and $5,000 for organizational costs, like incorporating — as long as the total spending to launch the business was less than $50,000.
Other eligible start-up costs include identifying potential business sites, travel costs to find suppliers, training programs for employees and accounting and legal fees, said New York-based tax attorney David Hryck. But any spending above $50,000 (and up to $55,000 maximum) will reduce your deduction, and remaining costs must be amortized over 15 years, he said.
The government also lets you deduct the costs of research and experimentation to develop or improve a product, formula, invention, process or technique. The costs of getting your own patent — including attorneys' fees for the application — can be deducted, but not costs from obtaining another person's patent.
"The R&D deduction and credit are not just for inventors or people with lab coats," said accountant Hank Hurst. "It's for innovation of all flavors."
While the R&D deduction is relatively simple for small businesses to take, doing additional calculations to claim the "innovation" or R&D tax credit can be more complex but rewarding for entrepreneurs, said Jacksonville, Florida, attorney and tax professional Jessie Seaman. The credit reduces taxes dollar for dollar, and entrepreneurs can generate the biggest credit by ramping up research activities over time, she said.
Spending on advertising, promotions, consumer surveys or quality-control testing unfortunately does not count as "research" costs for the deduction. Also, the IRS warns that individuals or corporations taking the above deductions may still owe the alternative minimum tax (AMT).
If you made some big purchases for your company this year, like equipment, computer software, office furniture or certain facilities, you are in luck.
Updated IRS rules let you write off these purchases with more generous caps than in previous years: You can deduct up to $500,000 in eligible spending as long as your total applicable property costs are less than $2 million.
"Let's say you have a hardware business and you spend $200,000 on materials for a new installation to make your paint department more appealing to shoppers," said Wheeler. "You used to be able to write off only part of that in one year, but now you can deduct the whole amount."
Work at home?
With the new simplified home-office calculation, you can take a deduction of $5 per square foot up to 300 square feet of office space, for a total of $1,500.
But Wheeler said it is worthwhile to try using the old method of calculating the deduction as well, since it might actually save you more money. Using that system, you first add up all the costs of your home — including mortgage interest, insurance, utilities, repairs and depreciation — and then divide that by whatever portion of your house your office takes up in square footage.
Just remember that your office really must be used regularly and exclusively for business, said Seaman.
"If I am calling something my office, it can't also have a TV and PlayStation that my kid comes in and uses," she said.
Contributions to traditional, SIMPLE and SEP individual retirement accounts can be made right up until April 18 and still count toward reducing your taxable 2015 income.
Likewise, you have until tax day to put money in a health savings account (HSA) so it can count as a 2015 deduction, said Wheeler.
Just remember that your total 2015 contributions to all of your traditional and Roth IRAs cannot be more than $5,500, or $6,500 if you're age 50 or older. The IRS lets you put all net earnings from self-employment into a SIMPLE IRA, up to $12,500, plus either a 2 percent fixed contribution or a 3 percent matching contribution. You can contribute up to 25 percent of net earnings up to $53,000 to a SEP plan.
For HSAs, you can stash away a maximum of $3,350 if you are an individual with self-only coverage, or $6,650 for family coverage.
You can save on taxes if you set up retirement accounts for your staff this year. Small-business employers can claim a tax credit for the costs of starting a SEP or SIMPLE IRA or qualified workplace retirement plan.
You qualify if you had 100 or fewer employees who received at least $5,000 in pay this past year, plus if you meet a few other requirements. The credit is worth 50 percent of your spending on setting up, administering and educating your employees about the retirement plan — up to a maximum of $500 per year.
However, the IRS says you can't both deduct the start-up costs and claim the credit for the same expenses.
Whatever you do, don't forget to review your account statements from 2015.
Doing so can remind you of easily overlooked business deductions, like those for the miles you drive in your car for business, interest paid on auto loans, apps and software, continuing education and even ATM fees charged on your business bank account.
The maximum deduction for a business gift to a client or customer is only $25, said Wheeler, but if you give a client tickets to the theater, a game or event, the deduction could qualify as "business entertainment" and you can deduct up to 50 percent of the cost.
Finally, keep in mind the Work Opportunity Credit, said Seaman, which helps reduce taxes for employers who hire workers from certain eligible groups, including employees who receive food stamps, were previously unemployed or are disabled veterans.