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What is the Ohio Small Business Tax Deduction?

Ohio Small Business Tax DeductionAre you familiar with the Ohio Small Business Tax Deduction? If so, your tax savings were probably nice this tax season. If you’re not familiar with it, keep reading. For those who qualify, you could still see some tax savings for the taxes you just filed.

What You Need to Know About the Ohio Small Business Tax Deduction

  • What is the Ohio Small Business Deduction?

Simply put, it’s a deduction available for small businesses that operate in Ohio – this could be your dental practice!  More specifically, it benefits the owners of a pass through business entity.  Owners can exclude 50 percent of their business profit up to $250,000.This deduction could eliminate up to $125,000 in otherwise taxed Ohio income.

  • Does my dental practice qualify as a small business? 

If you receive a K-1 form as an owner of your dental practice or you file as a schedule C taxpayer, then Ohio considers your business a small business and you qualify for the deduction.

  • How does it work?

The credit is taken at the individual level, not the corporate level. So you take the deduction on your individual income tax return by filing form IT SBD. The credit is 50 percent of your business profit minus a few items that Ohio doesn’t let you double dip. Some examples are your deduction for 50 percent self-employment tax or your deduction for self-employed health insurance.

The credit is only available for owners of Ohio-sourced companies. So if you operate only partially in Ohio, then an allocation is needed to determine how much of a credit is available in the state. This allocation is based on the location of your sales, property, rent and wages.

  • What if I zero out (or significantly reduce) my dental practice profits through bonuses? 

Good news, that’s not a problem if you are a 20 percent or greater owner in your dental practice. The law allows you to include compensation or guaranteed payments in the calculation of the credit.  

  • What if I own the building that my dental practice operates in? 

Good news here too, as you can also include the rental profit from the building into the Ohio Small Business Deduction, as long as the rent was received in the ordinary course of trade or business.

  • How much can you save?

It all depends on your circumstances, but it could be upwards of $6,500 per year in tax savings.

  • When did the law take effect?

The law was passed in late 2013, but was made retroactive for the entire year. As of now, this law currently stands for 2014 as well.

  • What’s the catch?

More good news, there really isn’t one! Ohio is encouraging investment inside the state, and this is one of the ways it is doing just that. In a way to offset some of these tax hits, Ohio raised its sales tax by 0.25 percent last year.

  • What if my tax return has been filed and I didn’t get this tax credit?

It’s not too late to amend your return if you qualify for the credit. Contact a Dental CPA at Rea & Associates immediately to work on getting your money back.

Contact Our Dental Practice Professionals

Need more information about the Ohio Small Business Tax Deduction and how it applies to your dental practice?  Contact Rea & Associates. Our team of bright dental CPAs can help you understand it and determine if it applies to you.

Differences Between Employees and Independent Contractors

Last month we had a blog post about the increase in unemployment audits. One of the areas that these audits focus on is the filing of independent contractors. It’s common for dental practices to identify dental hygienists as independent contractors, when they should truly be listed as an employee. If this misclassification is discovered during any type of audit, your dental practice could face fines and may have to pay back taxes. So how can you prevent this from happening to you? Understand the difference between an employee and an independent contractor.

What Is An Independent Contractor?

An independent contractor is someone who controls what they do at their job. They control what they are paid, use their own supplies/tools and do not receive employee benefits. An independent contractor is basically their own business and they are subjected to their own taxes. They also need to complete tax form 1099 for income they receive from your dental practice. Also keep in mind; independent contractors are not covered by workers’ compensation. So if they are injured while on the job, you may be financially responsible for their care and lost wages.

When To Classify As An Employee

If your dental hygienist comes to your dental practice using your tools, receives benefits and follows your employee handbook, they should be classified as an employee. He or she will need to be on your payroll and you will have to pay taxes on them. There has been a recent increase in the reporting of independent contractors, which is what has led to the increase number of audits being completed by the IRS and state agencies. To protect yourself and your dental practice from an audit and potential high priced fines and back taxes, ensure you are classifying your employees properly.

Contact Our Dental Practice Professionals

Unsure if you should be classifying your dental team members as employees or independent contractors? Contact Rea & Associates. Our team of bright dental CPAs will work with you to determine proper classifications and ensure you are paying the right taxes. Related Articles What to Know About an Unclaimed Funds Audit Could An Audit Be Coming to Your Dental Practice? Bye, Bye Money: Reporting Unclaimed Property

Why You Need A CPA When Selling a Dental Practice?

Dental Practice SalesLooking to sell your dental practice? Have you talked to your dental CPA about it? There may be some things you are unaware of when selling or some things you haven’t thought about that need done before your practice is sold.

What to Consider When Selling Your Dental Practice

  • Is the buyer qualified? It is important to verify that any buyers are qualified before talking to them about purchasing your dental practice. The buyer may not have been approved by the bank or they could be waiting for approval.
  • Is your equipment up-to-date? If you are selling now or in five years, you may want to consider purchasing new equipment. If your equipment is outdated, it might make your dental practice less attractive for buying.
  • Start cleaning and getting your practice ready to be purchased. Have old files lying around? What about old equipment hiding in a storage room? Get rid of things that are no longer needed and organize things that are so they can be easily found.
  • Be realistic about the price of your dental practice. If you are unsure about the true price of your dental practice, contact your dental CPA. They can help you figure it out and make sure you are getting the best value for your practice.
  • Help with the transition process. After you sell your practice, stick around for a few months. Help the new owner get adjusted. Introduce them to your referrals, partners, patients and staff. Get everyone comfortable with the new owner. It will make the transition smoother and keep everyone happy.

Contact Our Dental Practice Professionals

Selling your dental practice is a big decision and can take a lot of work. Make sure to consult with your dental CPA early so they can help you with getting ready.  Whether you are looking to sell now or within a few years, contact Rea & Associates. Our team of bright dental CPAs can work with you to determine the value of your dental practice and help you get it ready for selling.

Related Articles:

Why Do You Need A Dental CPA When Buying a Dental Practice?

Ten Tips for Growing Your Dental Practice

What To Consider When Purchasing A Dental Practice

Rea & Associates, Inc. | Bright Dental CPAs | 7201 Center St, Mentor, Ohio 44060-4858
phone + 440-266-0077