Tax Tips for Tobacconists

While the start of a new year brings excitement and opportunity, it also signals the start of a less enjoyable time—tax season. While some may try to put it out of mind or put it off for as long as possible, there’s no avoiding the inevitable. So, to make the season a little less stressful, and help you maximize your returns, here are a few tips and strategies which every business owner should know to help you save money and maximize credits and deductions.


Hire the Right Accountant!

You’ve worked hard to build your business. Now it’s time to let your business work for you. Finding the right accountant could mean a difference in paying or receiving thousands of dollars or more each year. Beyond preparing your financial statements and doing your taxes once a year, your accountant should work with you throughout the year to keep you on track with income and spending, helping make sure you aren’t having cash flow issues, and monitoring your profits.

A good accountant can also give you advice on how to grow your business, what you should contribute to retirement funds, whether you should take a bonus or delay it a year, and even whether you’re better off buying or renting your space.


Claim all Income Reported to the IRS

The IRS receives a copy of the 1099-MISC forms you receive which allows them to verify that the income you report matches what they know you’ve received. Make sure your self-reported income matches the amount on the 1099s. Not doing so is a red flag and may lead to the dreaded “A” word—audit.


Keep Good Records

Maintaining complete and accurate records year-round will not only simplify things at tax time, but it will also help ensure accuracy on your tax return. While a good accountant can do wonders for your business, if you don’t have the documentation, you could be leaving hundreds or thousands of dollars on the table, or worse, opening yourself up to a potential audit. TIP: Invest in at least a basic version of accounting software to help track everything throughout the year.


Separate Business from Personal Expenses

Never blur the lines between business and personal expenses. If the IRS audits your business and finds personal expenses mixed in, they may start looking into your personal accounts as well. Make sure you have a separate bank account—and separate credit/debit card—and use them strictly for business expenses.


Classify Your Business Correctly

One of the simplest ways to ensure that you don’t overpay on taxes is to classify your business correctly. Classifying your company as a C Corp, S Corp, LLP, LLC, Single Member LLC, or Sole Proprietor will have a different effect on your taxes. Small businesses should consult with both an attorney and an accountant to determine how best to classify the business. 


Manage Payroll

It is generally a good idea to hire a company to assist with payroll, and if you do, be sure to shop around and select one with a strong reputation. Just going with a company “because Joe uses them” is not advised. It’s your money and your business and you must find people you can trust to handle both. For instance, if you hire a lesser-known company and later find out they weren’t properly remitting payroll taxes for your business, you’re on the hook for it. 


Take Advantage of Capitalization

If you acquire a tangible piece of property or equipment for your business, you may be able to take advantage of a substantial deduction. TIP: A good accountant will be well-versed in the rules around capitalization. 


Charitable Contributions

According to Thomas Kennedy, CPA and owner of Chesapeake Financial Corp, “This is the final year that you can personally take a $300 deduction ($600 for those filing jointly) on your tax return over and above the standard deduction this year and your business can deduct as much as 25% of its income for charitable contributions. After 2021 the extra personal deduction goes away, and the business deduction returns to 10% of your company’s income.”

Retirement Contributions

“Keep in mind, that as an owner and operator of a small business, you are entitled to additional retirement benefits that allow you to save tax deferred money in a self-employed pension (SEP) in upwards of $57,000,” says Kennedy. “These contributions can be made up until April 18th, 2022.”


Employee Retention Tax Credit

Kennedy told us that although this credit expired for most employers at the end of September 2021, you can still go back and amend your federal payroll tax returns from 2020 and 2021 if you think you’re eligible. “To be eligible, you must show that you were either fully or partially shut down due to COVID or suffered revenue declines of either 50% (for the last three quarters of 2020 compared with the corresponding quarters in 2019) or 20% (for the first three quarters of 2021 compared with the corresponding quarters in 2019). If you are eligible, the credit is as much as $7,000 per employee per quarter in 2021, for example—and if the credit is more than the payroll taxes you paid, then you can get the money refunded. Many payroll services offer help calculating this credit,” said Kennedy.

Work Opportunity Tax Credit

“This additional credit was extended to 2025 and can reduce your taxes by as much as $9,600 per employee per year if you hire someone who is generally either out of the military, off welfare, out of prison, or has been unemployed for more than six months (there are other eligibility requirements),” Kennedy explained. “If you calculate the credit in advance of hiring a new employee—as some of my clients are doing—you can share the tax savings in the form of a hiring bonus, too, which could make the difference for bringing on that great new talent.”

Healthcare Tax Credit

The healthcare tax credit is offered on a sliding scale. Businesses which employ fewer than 10 full-time-equivalent employees with average wages below $25,000 per person get the most benefit. To claim the credit, use form 8941 to calculate eligibility. If your business did not owe taxes in 2021, you may be able to carry the credit forward. If a remainder of the tax premium exists, you can claim business expenses against it.

Family and Medical Leave Credit

While this credit was initially put into effect under the Tax Cuts and Jobs Act of 2017, Congress has since extended it twice, and it’s now applicable through 2025 under the Consolidated Appropriations Act. It is a general business credit that can be claimed by employers, subject to certain conditions and based on the wages of qualifying employees.

SECURE Act Credits

The SECURE Act is aimed at encouraging small businesses to offer retirement plans to their employees. It offers various tax credits to business owners who implement a new retirement plan, and the credits help offset the cost of setting up and administering the plan.

Energy-Efficient Tax Credits

Many business owners miss out on this one because it’s more under the radar than others. There are numerous tax incentives available to businesses that engage in more energy-efficient or “green” processes. Be sure to talk with your accountant to determine your eligibility!

R&D Tax Credits

 The R&D Tax Credit is a federal initiative created to stimulate innovation, technical design, and manufacturing. Businesses could save thousands with this credit on activities you’re already carrying out. While a considerable amount of documentation is required to qualify, it’s worth consulting your tax specialist.

State Employee Training Grants

Employee training grants work in a similar way as a tax credit. While it’s not everywhere, some states fund training programs through certain payroll taxes paid by the business. Depending on which state you’re in, and whether you’ve followed the reporting rules, you may be able to get reimbursed through a grant.

New Markets Credit

The New Markets Credit (form 8874) helps subsidize real estate investments in low-income communities. If you are considering expanding to one of these areas, the New Market Credit can help offset some of the expenses incurred in relocating your business.

Equipment Depreciation Credit

This tax credit allows business owners to recover the cost of certain equipment over time, and small businesses can depreciate said property when it’s used to produce income. Machinery, equipment, buildings, vehicles and furniture can all be depreciated, but it is important to consult a tax professional to ensure you do it correctly. 

Deduct Section 179 property

Small businesses can opt to deduct 100% of certain property as expenses in the year the business began using them. This is referred to as section 179 property and can include up to $1,000,000 of eligible business property in the 2021 tax year. Some eligible deductions include:

  • Property used in manufacturing, transportation, and production
  • Any type of facility used for business or research
  • Buildings used to hold livestock or horticultural products
  • Off-the-shelf computer software


  • Land
  • Investment property
  • Land outside of the U.S.
  • Buildings that provide lodging
  • Buildings that are used to store air conditioning or heating units

Bonus Depreciation

Bonus depreciation has been changed for qualified assets acquired and placed in service after Sept. 27, 2017. The old rules of 50% bonus depreciation still apply for qualified assets acquired before Sept. 28, 2017. These assets must have been purchased new (not used). New rules allow for 100% bonus “expensing” of assets that are new or used. The percentage of bonus depreciation phases down in 2023 to 80%, 2024 to 60%, 2025 to 40%, and 2026 to 20%. After 2026 there is no further bonus depreciation. This bonus “expensing” should not be confused with expensing under Code Section 179, which has entirely separate rules.

Fifty percent bonus first-year depreciation can be elected over the 100% expensing for the first tax year ending after Sept 27, 2017.

To truly make the most out of tax season and get all the deductions and credits possible, seek out a qualified tax professional. There are tons of tax credits out there, but the ones that matter most are the ones that most significantly affect your business.


Thomas “TJ” Kennedy, Owner, CPA

Chesapeake Financial Corp

(571) 464-0040

Qualified Experience and Expertise:

Thomas ‘T.J.’ Kennedy, owner of Chesapeake Financial Corp, is a Certified Public Accountant and a member of the American Institute of Public Accountants as well as the Virginia Society of Certified Public Accountants. He has multiple years of experience in both private and public-sector finance, with an expertise in government affairs, non-profits, construction and restaurant industries.

Prior to starting Chesapeake Financial Corp, he spent several years working in corporate finance as a comptroller, as well as at the U.S. State Department in a financial role. He also enlisted in the Navy Reserves in 2010. TJ grew up in Pennsylvania where he was “raised in the kitchen” of many small, family-owned restaurants and business. “Small businesses are the backbone of the economy and are the reason I started this business. I wanted to apply my expertise and help people like my grandparents grow their businesses. I’m able to do this by educating my clients and handling all of their financial responsibilities so they can focus on their core business competencies.” He holds a Master’s in Business Administration (MBA) from James Madison University and is also a QuickBooks ProAdvisor. TJ currently lives in Virginia with his wife Laura.

Sources used for this report include,, and Always consult with a tax professional before making financial decisions.