Last Minute Tax Tips for Your Small Business

Tax season is upon us, and there is one thing that all small business taxpayers wish they had more of. Okay, two things, but more money just means paying more in tax. I'm referring to time.

Most small business owners manage the entire operation of their business, from paper clips to payroll, and don't want to rummage through the minutiae of the tax code looking for guidance on last minute tax issues.

Here are five eleventh-hour tax tips to keep in mind:

1. Need to file an extension?
For small business tax returns, if you need an extension to file, you can use Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax Returns.

This form automatically provides a five- or six-month extension to file most business taxes, including Form 1065 (partnerships) and Form 1120 (corporations).

If you are a sole-proprietor with no employees, then you are likely reporting your business on your Schedule-C, coinciding with your personal 1040. If you need an extension to file your 1040, request it via Form 4868. This form also gives you an automatic six-month extension.

No matter what form you are using, keep in mind the IRS policy on extensions; an extension to file is not an extension to pay. The IRS still requires that any tax due will be paid in by the legal due date of the return.

2. Do you appreciate your depreciation?
The American Recovery and Reinvestment Act increased Section 179 deductions. Section 179 of the US Tax Code makes an allowance for deductions of certain assets as an expense, rather than requiring the cost of the property to be capitalized over time.

Beginning in 2010 and carrying through 2011, qualifying businesses can now expense up to $500,000 of Section 179 property. This provision encourages business owners to invest in new property and equipment by enabling businesses to write off these capital assets more quickly.

3. Offer health or retirement plans
Employers can take tax deductions for retirement and health insurance initiatives they extend to their employees. Certain IRAs and 401 plans both qualify.

If you offer a 401 plan and match a certain percentage of your employee's contributions, the amounts you contribute into their plan are deductible. Payroll deduction IRAs, SEP and SIMPLE IRAs, 401 plans and Keogh plans all offer various tax advantages to both employees and employers.

Along those same lines, consider offering your employees a health plan. Contributions you make for your employees into qualifying health plans or flexible spending accounts are 100 percent deductible as a business expense.

If you are self-employed with no employees, remember too that your own contributions for yourself, spouse or dependents for health insurance are also 100 percent deductible.

4. Take advantage of tax credits
The IRS offers you a heap of business tax credits. Form 3800, General Business Credit, is used to make a claim on combined credits. Allowable business credits are phased out once you have reached your total business tax liability for the year. However, certain credits can be carried back or carried forward to future years.

For a list of the 25 plus business tax credits that may be available to you, head over to the IRS Business Tax Credit page.

5. Deduct your home or vehicle expenses
If you are using a portion of your home or an unattached structure on your property for business use, the IRS allows you to deduct direct expenses, such as painting, repairs and modifications made to the identifiable business areas, as well as indirect expenses, such as a portion of your home's real estate taxes, homeowner's insurance, rent and utilities.

See IRS Publication 587, Business Use of Your Home, for more information.

If you also use a vehicle solely for business purposes, then the full cost to operate that vehicle is deductible to you. If the vehicle is used both for business and personal usage, then you are allowed to deduct the percentage of business use only.

Determine whether you are going to deduct the standard mileage rate, with is currently 50 cents for each business mile, or your actual vehicle expenses, which include such things as gas, oil, tolls, insurance, lease payments (not ownership payments), repairs, parking fees, licenses and registration.

See IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses, for more information.