PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Business Success Strategies with Barbara Weltman: Writing Off the Cost of Government Mandates for Small Business

By at 2 March, 2014, 12:29 pm

by Barbara Weltman-

Small businesses must take actions — often costly — to comply with federal, state, and local laws and regulations. Here is a roundup of when you can and cannot deduct the costs of compliance.

Providing Safety Equipment for Employees

The Occupational Safety & Health Administration (OSHA) is a federal agency that seeks to provide workplace safety for employees. There are numerous rules that employers are required to follow.

Barbara Weltman

Barbara Weltman, publisher of
Big Ideas for Small Business and member of SBE Council’s advisory board.

For example, employers must provide personal safety equipment, such as gloves, face shields or goggles, and special shoes necessary for employees to perform their jobs safely. The cost of such equipment can be written off. You may be able to expense the cost (i.e., deduct the cost in full in the year the items are placed in service) or depreciate the items (the typical depreciation recovery period is seven years).

Environmental Remediation

If you own your building and there has been contamination, such as asbestos, you must clean up or face EPA fines. Environmental remediation can be very costly. Whether the cost is deductible depends on what you’re doing:

  • Restoring the property to pre-contamination condition. The costs likely will be currently deductible as a repair costs.
  • Improving the property by bringing it to new standards. In this situation you usually must capitalize the costs and recover them through depreciation.

It’s not always easy to tell in which category remediation costs will fall. Discuss the impact of the repair” regulations with your tax advisor when undertaking remediation costs.

Accommodating Disabilities

The Americans with Disabilities Act of 1990 requires businesses to do two things:

  1. Make reasonable accommodations to employees with disabilities. This applies to businesses with 15 or more employees. An employer does not have to provide a reasonable accommodation if it imposes an “undue hardship” (e.g., an action requiring significant difficulty or expense based on an employer’s size, financial resources, and the nature and structure of its operation).
  1. Provide access for the disabled public. There is no minimum business size for this requirement; if you open your facilities to the public, there must be reasonable accommodations (e.g., automatic door openings) for those who are disabled.

The cost of certain reasonable accommodations, such as adaptive equipment (e.g., special phone equipment for a hearing-impaired employee or special computer screens for a sight-impaired employee), is deductible through expensing or depreciation.

For capital improvements, such as widening doorways and installing ramps, there are two write-off options:

A tax credit of up to $5,000 (50% of costs over $250 but not over $10,250) for small businesses. These are businesses with gross receipts of $1 million or less or no more than 30 full-time employees in the previous year.

  • A tax deduction up to $15,000 for removing architectural barriers to the handicapped and elderly. Costs over this dollar limit must be capitalized and recovered through depreciation. The deduction can be used with the tax credit. The deduction is limited to the difference between the total expenditures and the amount of the credit claimed, up to $15,000.

Health Coverage

The Affordable Care Act requires employers with 50 to 99 employees or full-time equivalent employees (FTEs) to provide health coverage starting in 2016 or pay a penalty (those with 100 or more must do so starting in 2015). Businesses, whether or not subject to this mandate, may pay for employee health coverage.

This year, determine:

  • Whether you are subject to this employer mandate
  • How to obtain affordable coverage if you must or want to do so

The cost of premiums can be written off as:

  • A tax credit if the employer is “small.” The credit for 2014 and 2015 is up to 50% of premiums.
  • A tax deduction for all of employer-paid premiums. If the credit is not used (the employer does not meet the definition of small), then all of the premiums covering employees are deductible as a business expense.

Conclusion

Government often places considerable burdens on companies; that’s the price of doing business. Fortunately, tax write-offs can soften the blow. Check with your tax advisor.

Barbara Weltman provides complimentary resources to small business owners and entrepreneurs through various platforms.  She is the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® at BarbaraWeltman.com.  Newsletter sign up: Click Here. Idea of the Day® sign up: Click Here. She also co-hosts Business Leaders radio, and is a member of SBE Council’s Advisory Board. Follow Weltman on Twitter @BarbaraWeltman.

 

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