Last Minute Tax Tips for Entrepreneurs

Last Updated Feb 16, 2011 5:08 PM EST

If you're like most small business owners and sole proprietors, you probably relish April 15 as much as a poke in the eye with a sharp stick. With hopes of easing your pain somewhat, I contacted Barbara Weltman, author of J.K. Lasser's Small Business Taxes 2010, and asked her to share a few 11th hour tax tips. So take a deep breath, put the stick down, and make sure you've considered the following:
  • Last year's loss could land you a fat refund. The net operating loss (NOL) carryback rules were extended under the Worker, Homeownership and Business Assistance Act of 2009. So if you had a net operating loss in 2009, you can carry it back up to five years, using it to offset your previous years' gains. "You could end up getting a tax refund," says Weltman. The benefit was previously available only to companies with annual revenues of $15 million or less, but that cap has been removed. One catch: a loss carried back to the fifth year can only offset 50% of your taxable income for that year.
  • Contributions to your healthcare savings account give you a triple benefit. "If they had a high deductible health plan for 2009, business owners can fund a healthcare saving account (HSA) up until April 15," says Weltman. "And the limits for 2009 are higher." Your HSA also gives you a triple tax benefit. "The money that goes in tax deducible; earnings on the account grow tax deferred; and money can come out tax free for medical purposes," she says. But remember that the deadline for 2009 contributions is April 15 even if you get a filing extension.
  • Fund your retirement plan. It's still not too late to put money into a retirement plan for your business. Weltman recommends a Simplified Employee Pension plan, commonly known as a SEP-IRA. "If you had a plan set up on Dec. 31, you have until the extended due date, October 15, to fund it. But if you didn't set up a plan, it's not too late." A SEP-IRA allows you to make tax-deductible contributions of up to 25% of your compensation, not to exceed $49,000. Even sole proprietors can set up SEP-IRAs (I have one, for instance, and it's saved me a bundle).
Do you have some clever tax tips to share with your fellow small business owners? If so, let's hear them.

Painful taxes image by Flickr user Mat Honan, CC 2.0