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October 2020

startup tax tips credits advice

How to Calculate Your Startup Business Taxes

By | Tax, Tax Credits | No Comments

All tech startups face one common issue: paying taxes to the IRS. You are still trying to find your footing in the business world, and just when you think you couldn’t spend more money, the government steps in to remind you that you have a statutory obligation to pay taxes.

Keeping up with your tax obligations can be tedious, but any misstep can result in huge tax bills.  Here are the most common taxes you should always keep in mind.

Are Tech Companies Tax Exempt?

No. Tech companies are required to pay federal tax. For a company to be tax-exempt, the founders shouldn’t make any profits from it. These companies generally fall under religion, public social benefits, culture & arts, human services, or health organizations.

Even though tax-exempt companies don’t have to pay federal tax, they are still liable for local income & state tax, and all donations made to them are tax-deductible.

Which Types of Taxes Should Tech Companies Calculate?

The type of taxes you pay are mainly dependent on your business structure and not the industry. Tax obligations often change on an annual basis, so it’s important to keep yourself regularly informed.

As a business owner, you must start planning for the following taxes.

1.   Employment tax

If your startup already has employees, you will have to file employment taxes to the federal government.

These taxes include income taxes that you withhold from the employees and submit it to the IRS on their behalf, including; Federal Insurance Contribution Act (FICA) taxes, Additional Medicare Tax, Federal income tax, and Federal Unemployment Tax Act (FUTA) taxes.

2.   Income tax

These are taxes imposed by the government on individuals and businesses based on their income. According to the law, income taxes should be filed annually, so that one is able to determine their tax obligations.

Income taxes are calculated based on the structure of your business (sole proprietorship, partnership, corporations). If your tech startup is a partnership, you won’t have to pay income taxes but will be required to file an information return.

3.   Excise tax

Excise tax is not mandatory for all businesses. It is only imposed on businesses that deal with manufacturing-specific goods (fuel, tobacco, alcohol, etc.) or those that use certain facilities and equipment or businesses. Most often, the excise tax translates as increased prices for the consumer. If you also sell tech products, find out if they are liable for excise tax and the forms you have to file.

4.   Self-Employment tax

For employees, the employer withholds a certain amount of money from their paychecks for Medicare taxes and social security. As an entrepreneur, however, you have to pay these taxes on your own via self-employment taxes.

Only 92.35% of your net income is subjected to this tax, and to calculate this, you deduct all your expenses from your gross earnings. There are exemptions to this tax, but generally, all earnings from self-employment above $400 should be taxed.

The Schedule SE on Form 1040 can be used to calculate this tax.

5.   Estimated taxes

This tax is imposed on income that is not subject to withholding, including interest, alimony, rent, dividends, etc. If you have additional income from other sources, it is advisable to conduct a paycheck checkup regularly, to avoid being hit with hefty bills at the end of the year. 

Let Incentax Help You Stay On Top of Your Taxes

Understanding the complex rules and requirements for tax incentives can be difficult and you may need a professional tax incentives advisor to help you navigate these murky waters. We are here to guide you on how you can get the most out of your tax credits and incentives.

Contact us today for a consultation on how you can effectively use your startup’s tax credits!

disabled access tax credit accessible building

Does Your Business Qualify for the Disabled Access Credit

By | Tax Credits | No Comments

It’s important to be as thorough as you can while preparing your business for taxes since there could be credits available for your business that you haven’t considered before. A good example of this is the “Disabled Access Credit.” Here’s some information about how your businesses may be able to qualify for this credit.

What Is the Disabled Access Tax Credit?

This credit helps businesses that go out of their way to accommodate those with disabilities. There are a few credits that fall in this category, with the Disabled Tax Credit being the first.

This is a non-refundable credit available for small businesses. It comes into effect when a business has expenditures from providing easier access to employees who have disabilities. In order to eligible, your business must have earned $1 million or less during the year.

Alternatively, it could have no more than 30 full-time employees during the year past. You can take the credit for every single year that you have expenses for offering access. The applicable form is Form 8826.

Other similar credits include the Barrier Removal Tax Deduction that applies to businesses that remove transportation and architectural barriers that get in the way of the elderly or the disabled. Another is the Work Opportunity Tax Credit, which provides credits and incentives to hire disabled employees. All these credits are mentioned on the same page.

Details and Examples

The minimum amount for Disabled Access Credit is $250, with the maximum amount being $10,000. The credit can count for extra access options you add for both employees and customers who need extra help due to having visual disabilities.

It could apply if you add sign language interpreters to help the deaf. Perhaps the expense you have applies to your decision to buy special adaptive equipment to help improve access. It could work under the circumstances where you added braille, extra audio take, computer materials or even just spent extra on large print for those who had trouble seeing.

It could also count towards fees for consulting services as well, in the right circumstance.

So, a specific example would be if you added access bars in restrooms, created a ramp for wheelchairs, and widened some doors for easier wheelchair access.

It’s worth noting that there are other tax credits related to disability access that you may be eligible for as well if you run a home construction business specifically. In general, it’s important to check for every potential credit you can.

Getting Started

The specific provisions for getting this Disability Tax Credit, as well as many other credits available for businesses can be in constant flux, especially in times such as these.

This is exactly why it’s important to make sure that you get help in understanding and preparing your taxes in the exact right way to receive the credit. This particular credit has limits for each improvement you make, for example, making it so that maximizing the credit will work easier if you make many improvements rather than just one or two large ones.

Making different improvements across different types of access can be advantageous here since it will both make the best use of the credit, and be the most helpful to the widest range of people.

It’s also important to consult with experts in case there are particular nuances of the credit to keep in mind in terms of how it applies to your specific business.

For more information about getting this credit and possibly many others depending on your situation, please make sure you don’t hesitate to go ahead and contact us at Incentax LLC today.