Small Business Tax Saving Tips & Strategies
In any business except taxes at any cost, from the federal government to city hall, you have to acknowledge which taxes your company is obligated to pay, how much you owe and when you have to file.
A single mistake can hike up your tax bill, but smart tax saving decisions can help in deducting your taxes, so prepare for tax returns as well.
Tax is the most annoying yet one of the most important topics for small business owners, but intelligent steps can save you a bulk of the money at the end of the tax year.
The beginning of the tax year is also an excellent time to review if you are increasing your tax deductions, or maybe you can also get professional or additional advice to save your taxes.
Saving your taxes concludes that you get to save more money than you earn; on the other hand, if you carry out such decisions carelessly, you might find your business in trouble.
Types Of Business Taxes
Income taxes: there are federal and often state income taxes to deal. Either the owner pays it from his profit share or the company pays it.
Employment taxes: if you have employees, you must hold on to the income taxes and the Social Security and Medicare (FICA) taxes from the employee’s share. You are also obligated to pay the employer’s share of FICA and even state and federal unemployment tax.
Sales taxes: if you are a goods and services seller, you have to pay, you might have to collect the sales records of your goods and services.
Excise taxes: some taxes could be excised on fuels, usage of highways, etc., depending upon individual businesses.
How Can You Take The Right Tax Saving Decisions
Books and records set-up
You can not keep a casual approach towards the record-keeping process for your business; to avail of certain deductions, one needs to stay proper individual records because, in the absence of these records, legal expenditure might not be deductible.
Smart tax elections
Under the tax law, income is taxable, and expenditure is deductible. This law avails you options on to what extent and at when the time you can get certain deducts.
Stay updated about law changes
The tax law keeps on changing. Therefore, you should stay updated.
With court cases, primary legislation, and IRS rulings taking place frequently throughout the year, this law keeps on changing, resulting in positive tax opportunities if you are aware of it and take action on time.
How Can Small Businesses Save On Taxes?
The priority question is if you want to let a professional handle your taxes related to your business and seek professional advice to plan out the ways to save taxes and certain deductions.
A simple way to solve this question is to look at the taxes and recognize if seeking professional help will cost you less than the tax bills you have to pay or not?
Another method to find out is to figure out how much tax you have to pay in a specific area and what measures you can take to get benefits on taxes in the future.
7 Small Business Tax Saving Tips
You can benefit from common tax rules which can give your business a good sum of money.
How can you do it?
Below are seven small business tax saving strategies:
#1. Retirement plan contribution:
If your company is making a good profit, you can direct a portion of your income to the qualified retirement plan that will avail your tax deductions.
If you have employees working under you, you can obtain their loyalty by providing them a golden opportunity for retirement savings.
#2. Adopting an “accountable plan”:
If you have employees working under you to compensate for their vehicles for the company causes, you can adopt an accountable plan to save them and the company income taxes and payroll taxes.
#3. Structuring your business properly:
Properly structuring your business is one of the most overlooked parts of the tax-related factors; many small enterprises do not change the business structure when they are supposed to but changing the structure can add tax benefits.
#4. Consider employee benefits over raises:
A simple way for business tax saving is to consider employee benefits over raises; you can compensate them by hiking-up your contribution to their health insurance instead of providing the same value as a salary raise.
#5. More investment in marketing:
Using digital marketing can help expand your business more as it has the better potential to reach the interested customers and, therefore, increase the company's profitability; plus, it will help you save your taxes as market expenses are capable of reducing taxes.
#6. Make donations:
Making donations is considered one of the most extraordinary deeds; it can save you taxes and give you the contentment of doing something good for someone. All you need to do is to donate via registered charities.
#7. Adjourn income and stimulate deductions:
You can postpone the income date for a few days after the end of the year and increase the current tax year's deductions.
You can postpone the income you were about to receive in December to January and pay the bills you were about to settle in January, in December.