The IRS was encouraging self-employed and small businesses to take advantage of tax benefits and resources aimed at helping small business. By taking advantages of certain tax benefits they will help them self’s meet their federal tax obligations.

“When you’re running a business, you don’t need to be a tax expert, too. But you do need some basics to stay tax compliant so your business can thrive,” said Faris Fink, IRS Commissioner for the Small Business and Self-Employed Division. “There are many tax credits and deductions currently available. So now is a good time to learn about the tools and services the IRS offers.”

The IRS SBTC(Small Business Tax Center) (www.irs.gov/smallbiz) was setup to help small business and the self-employed with useful tools and resources, including the VSBTW(Virtual Small Business Tax Workshop). They also provide a tax calendar, common business and self-employment forms and their instructions. This can help you when starting a business or becoming self-employed to apply and get an Employer Identification Number (EIN) online or how to work through issues when dealing with the IRS in the event of an audit. 

Health Care Tax Credit, Accelerated Write-Offs

Recently the IRS has been urging small businesses to take advantage of new tax-saving opportunities. These opportunities are available when small businesses file their 2011 returns. Two key provisions that business owners should consider are the small business health care tax credit and faster write-offs on certain capital expenditures.

The SBHCTC(small business health care tax credit) was put in place to help small business employers provide health insurance coverage to their employees. It is designed for small businesses that employ low and moderate-income workers. Congresses intent was to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage for the first time or maintain coverage they already have.

Eligibility Rules

• Providing health care coverage. For an employer to qualify the employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• Firm size. The employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000.
• Both taxable (for profit) and tax-exempt firms qualify. 

Amount of Credit

• Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010 (25% for tax-exempt employers). On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers). 
  Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

One new change enacted this year is:

Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions for 2011.

Other Small Business Changes

Many small businesses that invest in new property and equipment can deduct most or all of these purchases on their 2011 returns. Normally, businesses recover capital investments through annual depreciation deductions spread over several years. But many small businesses can get these deductions sooner during 2011. See form Form 4562. Special rules and limitations apply.