Tax changes for small businesses in 2016

February 29, 2016
February 29, 2016 TM Group

Tax changes for small businesses in 2016

Small business should carefully watch news coming out Washington about tax changes.

Benjamin Franklin once said the only things certain in life are death and taxes, but that’s not entirely true. While companies can be certain they will have to pay something to federal and state governments, the amount is always in question from year to year.

Tax regulations constantly shift and companies need business software solutions to help them stay ahead of possible alterations to existing laws. In 2016, companies should pay special attention to tax news that relates to employee benefits, possible deductions and sales tax.

Healthcare requirements
The White House designed the Affordable Care Act to ensure every U.S. citizen had access to healthcare. Since its inception, it has gone through numerous changes to make needed medical care more accessible. Entrepreneur described new amendments to the act that directly affect small-business owners.

ACA regulations in 2016 will expand to include any company with more than 50 employees. Even if a small business isn’t required to provide medical coverage, it can receive incentives to do so through the Small Employer Health Insurance Credit.

To apply for any tax credit, organizations need a complete data record of activities that affect filing. The new ACA rules call for increased oversight into the numbers associated with employee health benefits. Small businesses will need to report information pertaining to length of employee tenure, precise worker schedules and packages offered to staff.

A centralized ERP solution with features specifically designed for employee benefit tracking – such as Microsoft Dynamics GP – helps workers report their individual information to overseers. An easy-to-read benefits dashboard provides managers and accountants with a single source for critical filing information.

New deductions
Many organizations rely on deductions to take the sting out of filing, but businesses have to be wary about planning for funds that won’t be there if certain tax laws change. Accounting Today said the federal government often brings deduction extenders down to the wire. As businesses wait for regulators to make up their minds, they need ERP solutions that can model finances whether deductions pass or not.

In 2016, Forbes advised small businesses to pay special attention to the changing research and development tax credits. Significant alterations include granting small businesses the ability to take their R&D tax credit against their alternative minimum tax turnoff or their payroll taxes. These adjustments could be huge, but will require an organization to radically tailor its bookkeeping as it tracks business practices against tax costs.

Businesses should invest in a flexible ERP solution to keep up with internal or external adjustments to their business. Employees conducting research and development will have to carefully measure cost against what the company should expect to see in terms of a return on their investments into new ideas.

Sales tax
When buying company assets or selling products, sales tax will play a part in business cash flow. Software provider Avalara shared numerous examples of sales tax regulations that will change in 2016 and how they apply to specific states. The new rules will alter which products and services are exempt from payments and how companies have to report activities in individual states.

Businesses that operate in more than one state may need ERP features and modules that automatically alter tax reporting based on location. A product like Avalara can make responses to sales tax adjustments fast and easy.

Since 2016 is an election year, small businesses shouldn’t be surprised if many more tax alterations occur as one President leaves office and new candidates make promises to appeal to voters. All organizations should carefully monitor the news and implement solutions into their operations to help respond to changes.

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