Did you know that around 95 percent of the owners of small businesses overpaid their taxes over the past couple of years?
When it comes to being an owner of a small-scaled business, it can be quite expensive, as every dime count. Such people are living on razor-thin margins while constantly fighting for market shares. Come to think about it, owning and operating a business gets even more expensive when you pay more taxes than you actually owe.
A lot of entrepreneurs of small business get confused and likely think about the following questions:
1:- How Much Do I Pay?
2:- Why Do I Have To Pay This Much?
3:- Can I Reduce My Taxable Income?
Keeping in mind that the U.S Tax Code is approximately 70,000 pages long. It is understandable why a lot of business owners have trouble going through it.
As mentioned above, small business entrepreneurs live on thin margins, they strive to focus on the core value of their business and try to gain the attention of customers. They have a business to run. Expecting them to be tax professionals is out of the question!
As a business owner, you must know where and how you will be able to save money to invest the saving back into your business. But then again, paying taxes more than you owe, snatches this opportunity.
Want to know some tax-saving strategies that a lot of the small business owners miss out on? Keep reading until the end as we have compiled a list of 10 tax-saving tips for your business.
With the help of these strategies, you will not only be able to save money on taxes but will also make your life easier while you focus more on gaining more profit from your business.
Tip#1: Hire A Family Member To Work For You
Do you have a family member that can work for you? For example, someone that can help mow lawns as an employee of your lawn care business.
Hiring a member from your family implies that you can take a business deduction for compensation that is being paid to that particular person.
Tip#2: Don’t Sell Your Old Equipment
Have a piece of equipment that no longer provides a return on investment to the business? Find out, whether it is better to sell it or is it better to leave it abandoned.
Keep in mind that ordinary loss is fully deductible. You should find out on your own if your assets are being classified under section 1231 and then determine how you should get rid of them.
Tip#3: If You Are Eligible For Penalty Relief. Take Advantage
Based on the recommendations that your accountants make; you may incur a penalty from the IRS. If that ever happens, you need to instantly find out whether you are eligible for penalty relief or not.
Most of the time, failing to file a tax return is eligible for penalty relief. People who are considered for relief include the ones who tried to follow all the legal steps but somehow were unable to complete them due to reasons.
However, not everyone qualifies for penalty relief, but it is worth finding out whether you do, or you don’t.
Tip#4: Deduct Your Car Expenses
When it comes to deducting expenses, you need to calculate how much time your car is being used for business purposes. This is a point where you can apply to your overall car expense.
There are two categories for deduction:
1: IRS’s Standard Mileage Rate
2: Actual Car Expense
It is your job to find out which of the two prove out to be more beneficial for your finances before filing them.
Tip#5: Deduct Your Home Office
Most of the time, small businesses are operated from home. And often, owners fail to relate that they can deduct expensed that are related to the home-based office.
Tip#6: Pay For Your Retirement Now And Get Pay-Off Later
An independently employed laborer’s taxable salary can be decreased by putting extra money toward a conventional retirement account. The extra money isn’t taxed until the assets are pulled back in retirement.
Tip#7: Use Tax Filing Software
Try getting help by using a tax planner software. Tax filing software can help you prepare and even file your tax returns online along with backing up the filing with a maximum-refund guarantee.
Tip#8: Don’t Ignore Carryovers
Did you know that certain deductions have restrictions that can hurdle you from utilizing them in the coming year? Therefore, you need to keep a strong check on the carryovers, so that you do not forget to use them in the coming years.
Tip#9: Use Fringe Benefit Plan For Employees
Extra income can prompt the employment tax cost. Whereas, if the business pays for certain fringe benefits of the employees, such taxes can be easily avoided.
Tip#10: Do A Year-End Planning
Tax planning is a year-round task. You can get dramatic savings by taking action at the end of the year.