Smart tax-saving tips for small business owners
Small businesses are quite expensive to run. They need all the possible benefits to remain profitable because, unlike the more prominent competitors, they have a limited market share and their companies often have minimal margins.
One of the main problems that small businesses face is paying more taxes than necessary. To prevent this and make more profit every year, here are 5 tax-saving tips.
Best ways a business owner can minimize taxes:
1. Use tax return requests
Software for tax return has been on the market for a while and most companies use it now. They not only make the archiving process more manageable, but also ensure that you do not make avoidable mistakes.In this way you can submit with maximum accuracy, so that you get the refund that you deserve.
They help you make the right calculations so that you do not pay more than necessary. Income tax calculators such as Taxfyle can help.
2. Track your expenses
Tracking your expenses is essential, more for tax purposes. Although most business owners know how to prepare their profit and loss statements, they often do not understand that some of the items they have purchased can later be used as deductible when submitting returns.If you buy business products from the same account, reconciliation should be simple enough because banks send full money statements that enter and leave the accounts.
When in doubt, use software such as QuickBooks to keep track of every penny. These deductible amounts can lower your gross income, reducing the tax amount to be paid.
3.Do not ignore your retirement accounts.
Self-employed people often have the greatest ideas about their retirement. To finance these plans, you have to put away as much as possible when you want to retire.Here you can work with a traditional IRA that is capped at $ 5,500 a year. You can combine it with a pension plan such as the SEP-IRA or 401 (k). By first submitting these pension accounts, you significantly reduce your taxable income, saving you money that can be used for something else.
4.Home office deductions
Small business owners often use their homes as their office to save space and money when renting a formal office. What many entrepreneurs do not realize is that you can get a deduction for your home office from your taxes, but tend to be afraid of it, where you incorrectly look at their taxes.Although some companies are eligible for this type of deduction, they eventually ignore it and pay thousands of dollars more than they should have paid.
5. Transfer of tax deductions
Keeping track of your tax deductions from the previous year can be even more difficult because the figures must be exact and accurate.These are deductions for items such as net operating losses, capital losses, large donations to charities, and even deductions for home offices.