Every business owner has been there! Sitting with fellow business owners, hearing them go on and on about how little tax they have to pay every year. That said, when you take a closer look at things, you will know that the main reason they are paying such low amounts of taxes is not clever financial management. It is because they don’t get much of a turnover. To begin with, calculating your taxes accurately and paying them on time is not a bad thing. For one, you get that warm fuzzy feeling that you are contributing to society. Still, most importantly, it means your business is making tons of money.
Dealing with business taxes might be the least favorite business-related task for any business owner. Still, it is one they shouldn’t ignore. The crucial steps they take before the end of the year will help them save money almost instantly. After all, when you minimize the amount of money you have to pay in taxes, it means you will get to keep more cash. So, the sooner you take these steps, the better it will be for your business’s health. Thankfully, hundreds of tax-saving strategies out there can help you reduce your taxes as a business owner. Keep reading this article to know what these tax-saving strategies are.
- Hire a Professional Tax Accountant
With an expert tax accountant on-board, you will have to spend less time worrying about your business’s tax issues and more time handling its everyday operations. It means guaranteeing your company a few advantages:
- Ensuring finances are up-to-date
- Appropriate tax filling procedures
- Being the IRS’s good books
So, go ahead and hire a professional tax accountant who’s completed an LLM taxation online or through a campus-based university. He or she will provide your business with the expertise and tax knowledge to help your business reduce its taxable income. Not to mention, a tax accountant can serve as your business’s personal internal tax auditor too.
- Keep an Eye on Carryover Tax Deduction
Carryover tax deductions are possible on net operating losses, home office deduction, sizeable charitable donation, or capital losses. These deductibles, when not utilized in one year, can carry forward to the next. You might not remember tax info from the last week, let alone last year. These deductibles can slip away through the cracks, especially when companies hire and fire tax accountants regularly.
Being a business owner is hard enough and adding the stress of filing tax makes it even more difficult. A wise decision is to utilize tax management software to do the heavy lifting for you. With such software, you can track all business financial transactions, taxable income, and everything related to it.
Furthermore, it’s better if you have proper know-how about the tax system. To know more about financial and tax matters, you can always go for an online masters in accounting no gmat. It will give you the knowledge necessary to manage your accounts properly and reduce your taxable income in the process.
- Go for a Retirement Plan
No one has more retirement plan options than self-employed individuals or business owners. Suppose you fit into one or both categories. In that case, you will have access to a traditional individual retirement account(IRA), which caps 5,500 dollars per year. You can also combine this IRA with other retirement plans such as a SEP IRA or a 401(K), which will enable you to contribute 55,000 dollars annually. Contributions limits are more significant for business owners above 50 as well. They can combine a Cash Balance Pension Plan with a 401(K) and put away around 150,000 dollars per year. When you go with either of the retirement plan options mentioned, you will be up for a tax deduction. Have a chat with your tax accountant and financial planner to help you narrow down the retirement plan you should take.
- Deduct Your Travel Expenses
Suppose you continuously travel a lot for business-related purposes. In that case, you might be able to reduce your tax bill through travel deductions. You might not be able to enjoy the same benefit for personal travel. Still, business-related travel, on the other hand, is fully deductible. However, business owners can also receive reimbursement for their travel if they can justify its purpose. Whether it be any way of travel, if it is for business purposes, they can be redeemed whenever you want.
- Deduct Home-Office Expenses
If you operate your business from home, you might be able to deduct interest payments, mortgages, utilities, repairs. Even renters are also eligible for such deductions; you can calculate home office deductions using two methods. The first one is to multiple 5 dollars by the square footage used by your home-office.
The second is to multiply your home office space’s square footage with eligible expenses(like those mentioned above). However, the catch here is that your home-based office should not serve a dual purpose. You will have to cordon off that space and solely use it for business purposes.
The month of April should not be the only time of the year to think about your business’s tax payments. You should always be on your feet and understand how missing out on even the smallest of tax details can cause damage to your business. Consider the tax-reducing tips mentioned in this article if you want to maximize your deductible and always remain in the clear when an audit happens.