Overpaying for taxes can be death for many small businesses.
When you’re walking a tightrope trying to maintain your margins, getting slammed with big tax fees is likely the straw to break the camel’s back. You have to fight for every penny especially if you’re just starting out on your venture.
Fortunately, there are several ways to reduce your tax liability each year. For tips on how to save money on taxes, read on.
1. Use Available Technology
Don’t make things harder for yourself by doing everything manually. These days you can find software such as H&R Block to manage your tax affairs.
One of the advantages of tax planning software is that you don’t have to keep track of all the new laws and forms. This helps to minimize errors and maximize returns.
Other great tools for entrepreneurs are expense trackers and receipt scanners and trackers. By using these apps, you’ll have excellent record keeping of your expenses throughout the year. You also don’t have to keep all the receipts which can be misplaced or lost.
The tax filing process becomes easier and more accurate. This will save you time and money.
2. The Right Accountant Will Show You How to Save Money on Taxes
There are many reasons to hire an accountant for your business. While the ability to multitask is part of your job description, there’s the danger of spreading yourself too thin. Or maybe math isn’t your strong suit or you don’t have the tech-savvy to use tax software.
An accountant can take care of your taxes and also suggest tax minimisation strategies. But besides taxes, there are plenty of reasons to always have their number on speed dial. You’ll want an expert’s guidance when you’re formulating a business plan, getting a loan application, or preparing for an audit.
3. Look for Deductions Wherever You Can
One of the major reasons for overpaying on taxes is not being aware of all the deductions that you can take. You’ll be surprised by how much you can save yearly if you include all of the deductions that you’ve missed.
Some examples of deductions you may have ignored unknowingly before are:
- your home office
- car expenses
- travel expenses
- gifts, awards, and bonuses to employees
- business equipment
4. Hire Family Members
This isn’t about promoting nepotism but about the tax benefits that the IRS allows. If your spouse or children are involved in some way with your business, consider paying them for their services. Their income is potentially protected from taxes or classified at a lower margin.
What this means is that your taxable income is lowered. You can also avoid certain taxes such as the Federal Unemployment Tax Act or FUTA.
5. Set up a Retirement Plan
This is easier than you think. You have access to many retirement plan options as a self-employed or small business owner. While you may not be qualified for a traditional 401(k) plan, you can set up and fund a SEP IRA, SIMPLE 401(k), or SIMPLE IRA.
As long as it’s a qualified plan, you can reap the benefits of those tax savings.
Enjoy the Tax Season Without Worries
Not one business owner is giddy about paying taxes. But hopefully, this article on how to save money on taxes will make life easier during the trying tax season.
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