Getting Ready for Tax Day: Small-business Tax Breaks Finally Renewed

Renovations at BodyGear at Ithaca, NY. Tax rules make it easier now for stores to plan regular remodeling to refresh their spaces.
Renovations at BodyGear at Ithaca, NY. Tax rules make it easier now for stores to plan regular remodeling to refresh their spaces.

The new tax season opened on January 19, and this year’s filing deadline will be Monday, April 18, or April 19 in Massachusetts and Maine (March 15 for corporations). In the last days of 2015, Congress passed legislation that extended a number of tax breaks for small businesses and made some of them permanent. This is good news for storeowners because, as IRS commissioner John Koskinen put it, “it provides certainty for planning purposes.” In the past, when tax breaks were renewed each year only at the last minute, it was often too late for a business to take advantage of them. Here are some of the tax changes; your tax advisor can help you decide which might apply to you.

A provision that allows retailers to depreciate remodeling and other improvements to their stores over 15 years, rather than the previous standard of 39, has been made permanent. “The provision is important,” the National Retail Federation pointed out, “because retailers typically remodel every five to seven years. In addition to keeping stores attractive to customers and profitable, the remodeling work creates tens of thousands of construction jobs each year.”

Section 179 expensing, which allows businesses to deduct the cost of qualifying new and used improvements, including everything from computers and most off-the-shelf software to new fixtures and display racks, was restored to $500,000 retroactively for 2015 and made permanent. (It had been set at $25,000 for 2015.) In future years, the $500,000 cap will be indexed for inflation.

Bonus depreciation, which allows 50 percent of the cost of new (not used) assets or improvements to be written off, has been extended through 2017; it will go down to 40 percent in 2018 and 30 percent in 2019.

The Work Opportunity Tax Credit, which gives storeowners a tax incentive to hire disabled employees and welfare recipients, has been renewed through 2019. And now you can also get the credit for hiring workers who have been unemployed for 27 weeks or more.

Employee Background Checks

Be careful about this.

Background checks for sales associates make sense, since these staff will be handling money and dealing with the public. But, as recent court cases have shown, storeowners must pay careful attention to how they are done, even when using a background screening company. Before getting a consumer report on an applicant, businesses must comply with the Fair Credit Reporting Act (FCRA) by informing applicants or employees that they may obtain a report for employment purposes, and then getting their consent. The trick is that disclosure and job application must be separate documents. “Review your background check disclosure and authorization forms now,” suggests attorney Mark Wiletsky of Holland & Hart, writing in his firm’s blog. “Make sure your FCRA disclosure and authorization is not buried in your employment application.” If your disclosure forms include “extraneous statements, such as liability waivers, state-specific disclosures or other background check procedures,” your forms may not meet the requirement.

New Ways to Borrow—at a Price

Alternative lending options grow.

A U.S. Small Business Administration (SBA) loan may be the gold standard for funding, but applying for one can be a long, arduous slog. And then not every business qualifies. In fact, small-business lending has still not returned to its pre-Recession levels. To fill the money gap for small businesses, alternative lenders with innovative approaches (and often higher interest rates) have been popping up. Online platforms like OnDeck Capital and Kabbage, for instance, make loan application, approval and funding quick online, with decisions based on nontraditional factors like information gleaned from your store’s Facebook page as well as credit scores and cash flow. Kiva, a nonprofit peer-to-peer micro-lending platform, requires U.S. borrowers to get 10 to 20 friends and family to put up $25 each, before they gain access to no-interest crowdfunded loans of up to $10,000 on the Kiva Zip platform. Even some traditional banks are innovating: JPMorgan Chase announced it had teamed up with OnDeck to offer “small-dollar loans to our small-business clients.” As with any business decision, carefully evaluate all the costs up front and read the fine print. Print

Courtesy of BodyGear; Thinkstock

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