Nobody looks forward to tax season, but for small businesses, it can be an especially stressful time. Whether you are a new business owner or dread tax season because of how it interferes with your other business activities and your bottom line, there might be a couple of ways to make it less ominous. Read on top find some useful tax-saving tips for your small businesses.
We’re talking about ways you can save on your taxes. While it might seem like taxes are straightforward and there’s nothing you can do to lessen your tax burden, that’s not necessarily true. Depending on your circumstances and the type of business you run (for example, a shop specializing in CBD sales vs. online accounting services), there are several things you can do to help reduce how much you owe and how much tax season impacts your small businesses budget.
Here are a few of our top tax-saving tips for small businesses:
#1: Hire a Professional
A tax professional will be able to find all of the opportunities for your small business to save money on your tax bill—from devising an overall tax strategy, to finding deductions you wouldn’t have known you qualified for. Tax experts who specialize in serving small business clients will be well-versed in the different tax-saving strategies that provide the greatest value. They can evaluate your business’s activities and finances on your behalf and help you ensure your taxes are prepared correctly.
Plus, you can pay tax prep fees from refund, meaning you don’t have to worry about taking the money out of your current income if your budget is tight. When looking for tax help, just make sure you verify that the company is reliable and handles their tax filing in an ethical, customer-forward manner so that you can enjoy the peace of mind that your taxes are being filed correctly.
If you aren’t ready to spend the money on a professional tax prep service (keep in mind that they are often reasonably priced), you should consider at least using tax software. This will help minimize your risk of error and can guide you through the process.
#2: Track Deductible Expenses
As we mentioned, deductions can help you save money on your tax bill. However, you have to track them carefully in order to be able to take advantage of all the deductible expenses you’re allowed to claim. This might include:
First, you should take the time to learn about the types of deductions small businesses can claim on their tax return. Next, figure out which of your expenses fall into these categories. And finally, make the effort to track them, so that you have what you need when tax season rolls around.
Don’t forget to hold onto your records in case of an audit!
#3: Invest Income in Retirement & Medical
As a small business owner, you are your own employer which means you’re responsible for setting up your own medical and retirement plans. The plus side to this is that you can also utilize this as an opportunity to invest in yourself and save on your taxes.
When you distribute part of your income into certain accounts, it is not counted as part of your taxable income. When your taxable income is lower, you can potentially fall into a lower tax rate bracket. For example, if your income falls from $90,000 to $80,000—because you’ve been contributing to your retirement account and now that $10,000 is not considered taxable income—you would fall from the 24% income tax rate to the 22% income tax rate. While 2% might now seem like much out of context, that could mean significant savings on your annual tax bill.
For certain savings and retirement accounts, your contributions are made before taxes, so more of your money is being counted toward your future.
Saving on Taxes Benefits Your Business
At the end of the day, as the business owner, you make the final call and have to decide what’s right for you. However, saving on your small business taxes can only benefit your business. While paying business taxes is inevitable, by keeping these tax-saving tips in mind, you can lower your tax bill. Plus, when you save on your taxes, you can redirect these funds into other important aspects of your business like mobile advertising, business development, and improving your products or services.