2016 Tax Updates That Affect Small Businesses

The FUNDamentals Blog

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What’s new?

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• There are several new tax laws that will impact small business filings for last year and likely affect your business’ operations for the coming year. We’ve provided an overview of some of these changes including:– Deadlines– Healthcare requirements – Overtime – PATH Act – State & local laws

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Deadlines

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• Partnership returns are due no later than March 15 for calendar year businesses, or on the 15th day of the third month following the close of the business tax year for non-calendar year entities. This deadline change is a month earlier than previous years.

• C corporation returns are due April 15 for calendar year businesses, or on the 15th day of the fourth month following the close of the business tax year for non-calendar entities. This deadline change is a month later than previous years.

• S corporation tax returns remain due on March 15, or the third month following the end of the business tax year for non-calendar year companies.

• C corporation returns with a tax year ending June 30 are due September 15, through 2025. After the 2025 tax year, the due date shifts to October 15.

• Extensions are still available up to six months past the initial filing deadline for most businesses, although penalties may be applied.

* In addition to shifting filing deadlines, the IRS now has an extended audit period of six years, up from three in previous years.

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Healthcare requirements• As of 2016, business with 51-99 employees in the previous

year are included under the expanded healthcare law, creating the need to provide individual health-care coverage compliant with the Affordable Care Act (ACA) to 95% of employees.

• Businesses with less than 25 employees with average wages of less than $50,000 qualify for employer tax credits through the ObamaCare SHOP marketplace.

• Employers must report the cost of health coverage on each employees W-2 form.

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Overtime

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• Decisions surrounding overtime laws were delayed until July 2016, however small businesses should prepare themselves for these changes. Under proposed regulations: – The eligibility ceiling for overtime pay may apply to

those making as much as $50,440 annually. – There will be strict regulations surrounding who can be

considered an hourly employee, salaried employee, and independent contractor.

* Small businesses should keep tabs on employee data such as hours worked, benefits offered, and number of full-time employees

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PATH Act• The Protecting Americans from Tax Hikes (PATH) Act was

passed last year as part of the Consolidated Appropriations Act. Under the act, business owners can:– Deduct expenses associated with making improvements to their

commercial office space. – Save money by hiring particular individuals facing employment barriers

such as people receiving food stamps or veterans. – Deduct up to $500,000 in costs for property used for business

purposes. – Deduct qualified business related purchases such as machinery,

computers, and related expenses.

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State & local laws• Keep in mind that many states change their tax

laws. Be sure to stay up-to-date on your local jurisdictions’ tax regulations. – Use this state income tax calculator to help

determine how inflation adjustments may have affected tax brackets.

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