Did you know that there are over 30 million small businesses in the U.S.?
That’s a large number, so it’s no wonder that small businesses are responsible for the majority of jobs and economic growth. Despite this, many small business owners don’t take advantage of the many tax tips available to them.
You have enough going on operating a small business, which can be difficult, but being able to understand taxes is crucial if you want your company’s profits to go as far as possible.
When it comes to paying small business taxes, there are a few things business owners need to know. Here are six of our best tax tips for small businesses.
- Keep Good Records of All Transactions
In order to keep good records of all transactions, you need to have a good system that will allow you to file at the end of the year. For example, you should create a system for receipts.
You should file the ones that are for tax deductions into an “Income” folder and file according to the month of purchase. Another good system is to take pictures of receipts with your phone, so you have them immediately.
- Be Mindful of Any Changes in Your Company’s Structure
As a small business owner, if you’re not sure how to minimize your taxes, it’s important to be mindful of any changes that may have an impact on your tax deductions.
For example, you should be mindful of when the company becomes incorporated or goes through an S-corporation conversion. Small businesses often experience such changes, which could affect their ability to get certain deductions like mileage and travel expenses.
- Look For Ways to Reduce Your Estimated Taxes
There are many ways that small business owners can save money on taxes, and one of the most popular is the installment agreement. It is crucial for small business owners to pay their estimated taxes in order to avoid penalties and interest, but not everyone has the money in their bank account to do this.
You can offer an installment agreement in order to reduce your estimated tax payment obligation with the IRS. The government offers this option for taxpayers who owe $50,000 or less in combined state and federal taxes for a consecutive period of two years.
- Give to Charity
Charitable donations can be deducted from your taxable income. One of the biggest benefits of this is that it can result in large tax savings, especially for higher-income individuals.
When you donate goods or services, get a receipt for the donation so that it can be documented and counted toward your deduction. When considering making charitable contributions, remember to speak with a tax professional, as each situation is unique, and not all tax deductions are allowed.
- Choose the Right Tax Advisor
It’s important that you file with someone qualified for this position, like WealAbility tax advisors.
Additionally, you should find out what type of services they provide and how you can best work with them. For example, if you are looking for an accountant, it’s important to find one who has experience with small businesses.
You should also evaluate their qualifications with skills like any licenses or certifications they may have received. While there are many benefits of getting your taxes done by a qualified professional, there is also some risk involved because these people have access to your personal information so choose wisely.
- Take Advantage of Tax Deductions
Find all of the deductions that you are eligible for. This can be really beneficial because these deductions will reduce your taxable income, which could result in higher refunds.
You should review your previous year’s tax returns to see what deductions you were eligible for and make sure that you claim them this year. It might take some time to figure out which deductions apply, but it’s well worth it.
Tax Tips for Small Businesses
These are some of the more common tax tips for small businesses that escape business owners. Keep accurate records of all transactions using a good system so you can avoid the headache when filing taxes for your small business.
Remember to watch out for any business structure changes, keep track of any charitable donations, and speak to someone you trust.
Did you find this article helpful? If so, make sure to read more on our website.
click here for more articles
