For all companies, saving money on their taxes forms an essential part of their overall business strategy, but for small businesses, what they can save in taxes, could be the difference between success and failure.
Engaging with a tax professional is the best way to ensure that you can expertly manage your businesses taxes and save money, and below are some of the ways in which they will help you to achieve this:
Get you contributing to a retirement plan
For small businesses making a profit, income can be sheltered in a qualified retirement plan, and you’ll gain a tax deduction for your contributions, along with deferred taxes on earnings on contributions.
If you have any employees, they’ll definitely be grateful for the opportunity to save money for their retirement.
Help you adopt an accountable plan
By adopting an accountable plan for reimbursing an employee for business expenses, you can help them save income taxes, and your company to save payroll taxes. Because the expenses are not being treated as an income for the employee, the reimbursements aren’t included in their W-2 form and payroll taxes can then be saved on these amounts.
Arrange for you to defer your income and accelerate deductions
One way of increasing your tax deductions in the current tax year is by putting off income into the next tax year, and this can be achieved in a number of ways. One is to send your bills out a few days later, in the very last month of the year, helping you to get paid a few days later in January of the following year, and having the opportunity to defer the income, instead of getting paid in December and having to declare it straight away. Another method is to see what bills are due in January, and get them paid off before the end of December, enabling you to take the deduction during the current year.
If you’re struggling to get your head around any of these tips, it really does pay to consult with a tax professional, and have a third-partyplan and prepare your small business taxes.
Make sure your business is properly structured
Changing the structure of your small business as it grows and develops is essential, but many business owners overlook this aspect of their tax management strategy. This might include something like structuring your company as a C corporation rather than an LLC or S corporation, to gain tax advantages; a tax advisor can guide you on this.
Advise you to swap employee raises, for benefits
Compensating your employees by increasing your contribution to their health insurance costs, rather than giving them the same amount in terms of a salary increase, could save taxes for you and your employees. When employers give raises to their employees, they have to pay income tax, FICA tax and Medicare tax on those wages, but if they pay them more for their medical insurance, they no longer have to pay income tax, FICA, Medicare and unemployment taxes; both the employer and the employee save money.
Tax professionals will have a whole host of expert tax planning and management tips to help small business owners, and engaging with them could save you money right from the outset.