One of the major expenses many businesses face is taxes. With so many ever-changing tax laws and the complexity of it, it gets confusing on what you can do to save up on paying your taxes! And worse, there’s the risk of paying more than you should have, which is why it’s crucial to start planning and creating strategies before tax season to save and maximize your assets.
We all know how difficult it is to save on taxes as business owners, which is why I did the research to help you! So read on as I show you seven tax-saving tips for business owners and startups.
With any tax-saving tips out there, which are the right strategies and tips to follow? Here are the top seven effective ones to check out:
- Have Tax-Filing Software and Keep Track of Receipts
This is the first and obvious tip to follow for any business owners to stay on track and monitor their tax expenses. There are many platforms that can help prepare and file your tax returns while backing it up, all with the accurate information and the maximum-refund guarantees. This makes hurdling taxes easier!
Also, keep all receipts to track how much money spent on your business the entire year. These can also be deducted from your company’s taxes!
- Deduct Your Home Office and Car Expenses
Many small business owners have their own home office, but not everyone knows they’re able to deduct expenses related to it! Insurances, Bills from mortgage interest payments, as well as repairs and utilities, can be deducted from working at home! You’ll need to determine the portion of the home is for your business, which benefits businesses and homeowners.
Furthermore, your car expenses can also be deducted, simply calculate the percentage of time the car is used for work.
- Get Your Money’s Worth With Business Equipment and Don’t Sell Old Equipment
Small businesses can avoid tracking depreciation through treating the equipment as business expenses during the year it was bought. This can help you save quite a lot, especially on heavier, expensive equipment. You can check this through the lump sum approach using a tax calculator dedicated to Section 179.
Also, check if your old equipment can be considered either as an ordinary or capital loss, with the former being fully deductible.
- Hire Your Family Members
For those who have family members able to help with tasks related to the business (such as a teenager who can mow lawns for your lawn mowing business), you’re able to add tax savings to these benefits!
When hiring a family member, you have a business deduction for the erasable compensation paid to that member, which lowers your taxable income. It also gives you the chance to avoid taxes like the FUTA and FICA.
- Look Into Carryovers and Take Advantage of the Penalty Relief
There are deductions and credits which you might not be able to use in a tax year but can carry over in the next years (like capital or net operating losses, deductions, etc). Make sure to track these so you can use them in the next year without forgetting.
Also, if you are eligible, take advantage of the penalty relief. This happens when you were unable to meet payments on time due to reasons beyond one’s control or were able to resolve issues regarding penalty notices.
- Pay for Your Retirement Now
Those who have small businesses and are self-employed have a taxable income that can be reduced. This is done by adding additional money toward one’s retirement account. The money added will not be taxed until you withdraw the funds during retirement.
Depending on your age, you are able to contribute between $5,400 to $6,500 to the IRA. This helps you save while ensuring good retirement funds in the long run. Just make sure you track the money added to know how much you’ll pay for in taxes come retirement.
- Avoid Making Cash Payments and File Your ITR On Time
Last but not least, its best that you avoid making cash payments up to a certain amount (depending on your location) when paying your taxes. This is because there is an income tax act, which disallows expense deductions if you pay in other ways than draft or cheque.
Also, make sure that your file your ITR on time so you are able to get the benefits and prevent any losses on your business income. It also prevents any issues that may arise in the next years of handling your business and its taxes.
Wrapping It Up
Owning a business is costly as it is, especially when you have a small business where every penny counts! That’s why it’s crucial to ensure that you save as much as you can, even during tax season where you can save and prevent paying more than what you owe. It takes strategizing and planning, but spending time doing this can help save you a lot more in the long run.
Hopefully, this article on tax-saving tips helped you out! So don’t wait any longer and look into following any of these tips and consider hiring a Gold Cost Accountant to save on your business’ taxes now.
If you have any questions or want to share your tips and experiences on saving on taxes, then comment below. I would love to hear what you have to think!