With the self-employment tax at 15.3%, learning the best small business tax tips is a must.
Avoiding paying taxes that you don’t owe is legal and ethical, so stay on top of the law and make sure you understand what you’re paying and why.
Continue reading this article to learn about small business tax savings and tips to help you survive tax season.
1. Adhere to Deadlines
When you hate the thought of doing or paying taxes, it is easy to put taxes off to the last minute. While putting taxes off to the last minute isn’t a great practice, it is better than being late.
Make sure you understand the deadlines you have for your taxes, so you don’t get slapped with fees. You can learn more about the deadlines so that you don’t accidentally miss one and have to pay extra taxes.
2. Use Tax Software
If you decide that you don’t want to use a professional firm to take care of your taxes, you should look into using one of the many free tax software programs available.
Tax software is easy to use, and many of them even have customer support that will help point you in the right direction if you’re having a problem.
One of the major reasons you should use tax software is because they can protect you against audits. If you do get audited by the IRS and have to pay fees, they will reimburse you for those fees or penalties. If you made the mistakes yourself, you’re stuck with the bill.
3. Don’t Lose Receipts
If you’re going to use something for a business expense, make sure you keep a close eye on those receipts. Put them up right away and file them where you know they are going to be kept neatly in order.
In case you do get audited, you’re going to need to show proof of the expenses you claim. Failing to show receipts could mean that you won’t be able to claim those expenses.
Depending on how major the expenses are, it could be a big problem for you, which would result in fees and penalties.
4. Invest in Retirement
Investing in retirement now is a good move. When you invest in a retirement account, you won’t have to pay taxes until you retire, which could put you into a lower tax bracket when you’re withdrawing the money.
Depending on your age, the limit you’re allowed to contribute will be different. Make sure to check with your financial advisor and see what they have to say about the investments for retirement.
5. Expense Business Equipment
While you can depreciate business equipment, if you want to get the full amount of your business equipment, you can expense the business equipment within the year that you buy it.
Check with your tax professional to see how much money you can save by using the lump sum approach instead of using depreciation.
6. Hire Family Members
Hiring family members to do tasks for your business is one way to keep the money in the family, but it is also a way to avoid paying taxes like FICA and FUTA.
Being able to hire family members to do things in your business also helps lower your taxable income, which reduces the amount of taxes you have to pay.
7. Check for Carryover Items
There are some cases when you aren’t able to use a whole deduction in that year. In these cases, you will be able to carry them over in the future years. These things might include charitable deductions, net operating losses, capital losses, and similar items.
Keep track of them so you don’t forget them when tax time comes around because they could save you a great deal of money.
8. Opt to Abandon
Abandoning your equipment could be a better option for you when it comes to taxes vs. selling it. When you abandon your equipment, it is considered an ordinary loss. When you sell your equipment, it is considered a capital loss. So you have to opt for blaux portable ac reviews before making the decision.
Ordinary losses are totally deductible, so this is usually the better option.
9. Check for Penalty Relief
Even if you use tax software or if you use a great accountant, you might still get a penalty from the IRS. Sometimes penalties are unavoidable, but there could be something you can do about it.
When you find out that you’re up against a penalty, check to see if you’re eligible for penalty relief. You might be able to get penalty relief if you were late filing or if you weren’t able to pay your taxes on time.
If you were unable to meet the requirements because of circumstances outside of your control, you might be eligible for tax relief. You may also get tax relief if you were able to resolve the issue for which you got the penalty.
You may not be in either of these two groups, but checking with the IRS won’t hurt you, and it could save you thousands of dollars in taxes.
Now You Know Important Small Business Tax Tips
Now you know important small business tax tips that are going to allow you to save money and only pay taxes that you owe.
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