Small business reg­u­la­tions and schemes –hints and tips

Sometimes it can seem like tending to business admin is like facing a hydra in battle – just when you think you’ve sorted every­thing out, the next wearisome task raises its ugly head. When you’re starting up a new business, this effect can be all the more worrisome: did you think of every­thing? Could there be something that you left out? To then ensure you can maintain a good work-life balance, as well as being not only on top of your taxes, but also fi­nan­cial­ly secure seems like an almost im­pos­si­ble ask. That is why it is well worth informing yourself about small business reg­u­la­tions, the potential tax de­ductibles you could be paying for out of pocket, and also the various schemes that could be out there to help new and small busi­ness­es with their tax relief.

In Europe, certain member states have reduced VAT levels, or ex­emp­tions for busi­ness­es earning under a certain amount. This is not entirely the case across the USA; but from state to state it is possible to find certain schemes which have been put in place to help small busi­ness­es find their feet. For example, in New York, the scheme “Start Up NY” helps busi­ness­es through tax-based in­cen­tives, and offers new and expanding busi­ness­es the pos­si­bil­i­ty of going tax-free for 10 years. There are re­stric­tions to this, however, as this applies to busi­ness­es which are on or near eligible uni­ver­si­ty or college campuses within New York state, but nev­er­the­less, if a business is partnered with a college or uni­ver­si­ty, joining this scheme could help it for the first ten years of its operation. There are a few busi­ness­es, which are not allowed to apply for this scheme, including: restau­rants, retail and wholesale busi­ness­es, hos­pi­tal­i­ty, real estate companies, as well as medical and dental practices. For the full list, visit the StartUp NY webpage. It will be worth your while to inform yourself of any other small business schemes that your state or even local gov­ern­ment may have. It is also important to see which small business reg­u­la­tions your state may have in place, and keeping up to date with tax in­for­ma­tion. For example, as of 2018, there was a change to first year bonus de­pre­ci­a­tion, which could massively help small busi­ness­es.

In order to be able to hire workers, or generally increase the money start-up busi­ness­es have, a change in tax leg­is­la­tion in 2018 meant that the first year bonus de­pre­ci­a­tion has risen from 50 to 100%. This means that equipment and property purchases can be deducted in full, rather than having to write off some of the expense each tax year. The money saved from this is what should help small busi­ness­es flourish.

While it may be time consuming to review invoices and receipts for your annual financial statement, it could be very much worth your while to keep an eagle eye out for de­ductibles. These are not tax ex­emp­tions for small busi­ness­es, but rather a good way of ensuring you make the most out of your tax return. Although it may seem like you have to spend money around tax time, you could really be saving lots of money by deducting certain things from your income, which you have spent money on for your business. Below, we will look at a com­pre­hen­sive, although by no means ex­haus­tive list of small business tax de­duc­tions with an ex­pla­na­tion of how they apply.

If you run part of your business from home, you may be able to deduct amounts from what you pay in rent and utilities for your home. However, you must work at home in a dedicated working space – setting up late at night at the kitchen table once in a blue moon is not enough to qualify for this. If you are self-employed, it is pretty much a given that your desk at home is like the desk you would have at work, but if you split your time between home and the office, you should pay attention to exactly what counts as a home office space. This par­tic­u­lar de­ductible is a tricky issue at times, because it is, for obvious reasons, difficult to regulate. It is advisable to check out the exact guide­lines with the IRS and speaking to your tax advisors and ac­coun­tants before adding this de­ductible to your tax return.

If you do not have an in-house ac­coun­tant or attorney for your business (as a small business you will not, and it is unlikely for a start-up). This does not mean, however, that a small business should not be able to deduct these services, and the good news is that you can! Pro­fes­sion­al services span from ac­count­ing to marketing con­sul­tants, and you can deduct the fees as long as they are rea­son­able, ap­pro­pri­ate for your business, and were incurred in the tax year in question. More precise in­for­ma­tion can be found in IRS lit­er­a­ture, or through your tax advisor.

This has not even begun to scratch the surface of all the possible de­ductibles out there. De­ductibles such as salaries and wages, work op­por­tu­ni­ty tax credit, and client and employee en­ter­tain­ment are all further cat­e­gories for which a tax deduction might be possible. More in­for­ma­tion on this can be found at the IRS website on deducting business expenses.

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