Do you have a business? If you do, then you should be concerned about what taxes will cost your company. Many entrepreneurs worry about how much they owe and whether the government will find out their secret side-hustle when it comes to tax season. This article covers 11 ways to help cut your tax bill and keep more of your hard-earned money in your pocket.
What do you need to know about business tax?
Running a business means you have to worry about taxes, and it’s tough figuring out how much needs to be paid. Many different types of businesses may require other tax considerations, which may seem like a daunting task, especially for startups. You may “think a tax advisor near me is beneficial for your business?” or procrastinate it first. Let’s check out various ways to help cut your tax bill and keep more of your hard-earned money in your pocket.
What is the difference between an S corporation, C Corporation, and LLC?
An S-corporation is a tax designation for small businesses with up to 100 shareholders. A C-Corporation has more than 100 investors, while an LLC is considered a form of partnership that files taxes as corporations. If you are unsure which entity type could suit your company, consult with a tax professional.
How to effectively cut down your business tax
As a business entrepreneur, it is your responsibility to keep an eye on what you are spending. Not only do taxes impact the profitability of a business, but they also affect the amount that can be taken out for personal use. To make sure you don’t overspend and take too little out for yourself, keep these factors in mind;
Create a separate saving account for your business and use it to save money instead of drawing from your business account. If you are using a separate account, the interest will go back into your business and not towards personal use, which means more profit in the long run.
Track all expenses
Keep track of all your expenses in your business, from office supplies, mileage, internet access, and travel, to make sure that they are all being accounted for. Remember only to deduct the costs of materials used or services rendered to keep your business’s taxable amount as low as possible.
Consider incorporating as an LLC
Incorporating as an LLC or S-corporation will help you maintain separate finances and business accounts. This will prevent liability transfers to business from your assets if an unforeseen event like a lawsuit or bankruptcy.
Check your company’s 401(k) plan
Keeping track of your business’s 401(k) plan can be a great way to save on taxes. You may want to consider contributing the maximum amount possible that your company offers to defer income and have access to tax-deferred growth.
A good point about this is, you are not taxed if it’s taken out of your paycheck before payday for some people because they get no money left after their bills. So when all their utilities come up, there isn’t any leftover for themselves or even food unless they put it on credit cards, which will only worsen later down the road.
Take advantage of tax credits and deductions
Find out what credits and deductions your business may qualify for with the help of a CPA or tax professional.
The good thing about these is they will most likely be able to give you some pointers on how you can reduce the taxes your company owes, which in turn could save it more money in the long-term. The important thing is that if you want to take advantage of those savings, then make sure to seek out this information as soon as possible, so you don’t miss any opportunities.
Offer benefits to your employees
If you have employees, another way to reduce your company’s tax burden is by providing them with benefits. For example, if you offer health insurance for your staff, the Internal Revenue Service will let you deduct contributions from your corporate taxes up to 50% of what it costs per employee.
List business expenses
Write down all of the expenses your business has, and make sure you document them. This will help if something should happen to you or anyone else who knows how things work with the company.
Consider a small business retirement plan
This can be a great way to save on taxes, as long as you’ve made the contribution and then taken it out of your paycheck before payday. This will allow you to reduce the taxable amount at one time while still saving for retirement over an extended period.
Take advantage of training programs
Take advantage of seminars, training programs, or webinars that have to do with tax planning and compliance, and make it a point to attend those if you want your business’s tax burden to be as low as possible.
Consider hiring an accountant
Hiring an expert to help with your taxes can also be a great way to keep them low. Accountants that specialize in taxes can point out any mistakes and will also be able to make sure you take full advantage of the available deductions.
Take care of all tax obligations
Make sure to get all of your tax obligations taken care of on time. This includes paying the appropriate sales taxes and state or local income taxes, if applicable.
Finding ways to cut your business taxes can be challenging, but we hope these tips will help you out. Remember that the most important thing is to know what credits and deductions your company can take advantage of to minimize taxes owed or even reduce them altogether.
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