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Commonly Missed Tax Breaks for Startups and Small Businesses


It is hard to believe, but it is already that time of year when companies have to start thinking about submitting tax returns. For many companies, this is one of the most dreaded times of the calendar year. There are plenty of do-it-yourself services that can guide you through the process, but it does not make it any less confusing. And, as your company grows, the complexity of doing your company’s taxes usually grows along with it. The following is by no means intended to be an exhaustive list of tax breaks for small businesses, and companies must research to ensure that they are entitled to any such deductions or credits, but here are a few that are frequently overlooked:


Startup Costs

There are several types of costs associated with getting a startup off the ground that may qualify as tax deductions. According to the IRS’s explanation, “Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. Organizational costs include the costs of creating a corporation. For more information on start-up and organizational costs, see chapter 8.”


Companies should be sure to keep track of all costs incurred in connection with establishing their businesses to ensure that they qualify for this great savings.


Research and Development Tax Credit

Companies engaged in a great deal of research and development (R&D) will definitely want to take advantage of this tax credit. The R&D tax credit covers R&D expenditures that are “incident to the development or improvement of a product. R&D expenditures include the expenditures of obtaining a patent, such as attorney's fees expended in making and perfecting a patent application.”


And, there is also a credit for increasing research activities. This pertains to research that is “undertaken for discovering information that is technological in nature, and its application must be intended for use in developing a new or improved business component of the taxpayer. In addition, substantially all of the activities of the research must be elements of a process of experimentation relating to a new or improved function, performance, reliability, or quality.”


These are clearly of tremendous help for companies engaged in life sciences and biotechnology. And, given that many of the IP-related costs appear to be included, this can add up to quite substantial savings.


Work Opportunity Tax Credit

This is a great tax credit opportunity for companies that hire employees from what the government terms “targeted groups,” which includes recipients of certain types of federal aid and veterans. This was first introduced a few years ago and has been extended and revised, so be sure to check out a detailed explanation of who is eligible and how to apply this deduction.


Equipment Deduction

For companies that are just getting started and continuing to invest in certain property and equipment, section 179 allows you to deduct the expenses associated with these acquisitions. The eligible property includes computer software, machinery, and other types of equipment. Small business owners know that these expenditures can add up quickly, so this is tax savings that should not be missed.


Home Office Deduction

The home office deduction is probably most useful for single-member LLCs that operate their businesses from the comfort of their own home office. However, plenty of startups allow their employees to work remotely these days, so this is a deduction that should be mentioned to them as well. The specifics on how this particular deduction works can be found here.


This is a pretty short list from what is more than likely a lengthy list of potential tax credits and deductions for small businesses, so companies should do ample research before submitting their returns and/or consult with a tax professional to ensure they maximize their savings.

Disclaimer: SecureDocs, Inc. and its affiliates do not provide advice relating to taxes or legal matters. This blog was written for informational purposes only. Therefore, it is not intended to provide tax or legal advice, and it should not be construed as such. Please be sure to consult an appropriate professional for advice pertaining to these matters.