Most small businesses are required to file the New Hampshire Business Profits tax and Business Enterprise tax. Are you confident you know what these taxes are and how much you should plan to owe on them as a small business owner?
NEW HAMPSHIRE BUSINESS PROFITS TAX
If your business has gross receipts over $50,000, then you are required to file a Business Profits Tax Return, a tax of 8.5% of the ‘net income’ apportioned to New Hampshire. . From this , you can then take a deduction for reasonable compensation for personal services. A typical small business owner who’s typically doing the work in his small business will have no problem often justifying that 100% of his or her Schedule C income is reasonable compensation. But there are all sorts of traps here, so be certain you’re doing this right, particularly once we introduce the BET tax!
NEW HAMPSHIRE BUSINESS ENTERPRISE TAX
This is a tax of .75% on your Enterprise Tax base of all wages (including Reasonable Compensation above), interest (including any Mortgage interest from a Home Office), and any dividends paid. This tax will also reduce dollar for dollar any Business Profits Tax you would owe. So, essentially the Business Enterprise Tax is a minimum tax to make sure that all small business owners pay something, particularly since so many avoid the clutches of the Business Profits Tax.
What I just presented is a simplified explanation of these taxes. Quarterly estimates are required to be made as well.
Do you know if your small business is affected by the New Hampshire Business taxes? Because we have no income tax IN New Hampshire, many small business owners often don’t file these tax returns, until several years later when the state comes knocking, and they will.
Also, planning can be extremely difficult with these two taxes, particularly where certain techniques often used in other states will backfire in New Hampshire, partly because New Hampshire does not recognize flow through entities such as S Corporations.
We run into clients all the time that haven’t prepared these taxes or simply prepared them incorrectly, often we end up saving them a substantial amount in overpaid taxes once they come to us. This is what Business Financial Confidence is all about. Let our accountants help you get that confidence with our Business Financial Confidence Map.