4 Tax Breaks Every Small Business Owner Should Know About

Did you know small businesses employ more than half of the country's workforce?

While most people tend to think new industrial giants are the most important factor in driving the country, small businesses are actually the backbone of our economy-they create jobs, spur growth and lead innovation, creativity and production.

That could be why there's several tax breaks designed specifically for small businesses.

1.  Healthcare Tax Credit

Thanks to the Healthcare Reform, small businesses can expect big change: the maximum credit will increase to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.

To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.

But there are a few restrictions: the company can only have 25 employees or less and each employee can't make more than $50,000. And remember, in order to qualify, you'll have to purchase insurance through the SHOP Marketplace for tax years 2014 and beyond.

2. Section 179 Expensing

Section 179 was designed with businesses in mind-that's why almost all types of business equipment can qualify for the deduction. In general, the credit was designed to help businesses and make purchasing equipment during the calendar year financially attractive.

Any new equipment, machinery, furniture, computers, off-the-shelf software, fixtures and vehicles currently in-use by employees or for business purposes can be considered a business expense. But, keep in mind: for the upcoming 2014 tax year, Section 179 has been restored to its original limit of $25,000 plus an adjustment for inflation.

3. Limited Penalties on Tax Errors

A small mistake could mean big money.

In fact, until the Small Business Jobs Act came into play, you could have shelled out anywhere from $50,000 to $200,000, depending on the mistake made. But, as the most significant piece of small business legislation in more than a decade, the law is providing critical resources to help small businesses continue to drive economic recovery and create jobs.

Because of the act, penalties have been capped at 75 percent of the mistake-unless, of course, your "error" is paying your taxes late. That could cost you anywhere between $75,000 and $200,000.

4. Start-Up Costs

Yes, your business incurred deductions before you were even in business!

Defined as a deductible capital expense used to pay for the cost of investigating the creation or acquisition of an active trade or business, a start-up cost includes costs incurred for surveying markets, product analysis, labor supply, visiting potential business locations, employee training and wages, consultant fees, advertising and travel costs associated with finding suppliers, distributors and customers.

Back in 2004, small business owners were allowed to deduct $5,000 in business start-up expenses. Recently, that limit was raised to $10,000-for good. And you can thank President Obama!

But don't forget: as soon as you are operational, your costs are considered as expenses of an operating business.

P.S.: Have you scheduled your QuickBooks training yet?

Is Your Business Using the Right Accounting System?

Have you ever tried on a shirt or jeans and found they didn't fit at all? They looked great on the hangar, but that was the end of it. Accounting systems come in all sizes, shapes, and colors just like clothing; and just like clothing, some accounting systems fit your business better than others. It's not that easy to spot in a mirror when an accounting system does not fit a business, but there are other signs that will give it away. Here are five of them:

1. Numerous Workarounds

A workaround happens when your current system cannot do all the things you need it to do. A workaround can take the form of a spreadsheet, a report, a program, or a database that is created with extra time spent every month so you can get the information out of your system and manipulate it the way you need it to run your business.

Since no accounting system is a perfect fit for any one business, it's normal to have some workarounds in place to meet your unique business needs. If you have too many, it might signal that you've outgrown your current system and need to find an accounting system that provides you with more functionality.

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