Running a successful business goes hand in hand with good tax management. If you overpay on your taxes, you’ll soon start to notice your profits disappearing, and without sound planning throughout the year, this can happen all too easily.
But while poor tax management is a huge problem for many small businesses, it doesn’t have to be that way for yours. Efficient tax preparation in Miami can help you minimize your tax liability, and provided you stick to the rules and work with a professional bookkeeper, you can do so legally, and very effectively.
Here are some of the top tax strategies for legitimately reducing business taxes:
Making the most of business deductions
Some eligible expenses may be deductible, including the following:
- Home or office rent
- Software and equipment
- Advertising and marketing
- Professional services, such as accounting, bookkeeping and legal
- Wages and benefits of employees
Just remember to keep all relevant receipts along with detailed records to support your deductions.
Making use of Section 179 or bonus depreciation
With the help of Section 179 or bonus depreciation, you may be able to deduct the full cost of vehicles or equipment for your business, in the year that they were purchased. For many businesses, this offers significant tax savings.
Taking on employees strategically
You may qualify for certain tax credits and deductions when you hire independent contractors or employees, such as the Work Opportunity Tax Credit (WOTC), which rewards the hiring of ex-felons, those who are long-term unemployed, or veterans. You may be able to reduce your tax burden further by offering employee benefits that are tax advantageous, like health insurance and retirement plans.
Making contributions to a retirement plan
While helping both you and your workforce save for the future, retirement plans such as a SIMPLE IRA, SEP IRA, or Solo 401(k), can also help you lower your taxable income when you make contributions to them, as they are tax-deductible.
Opting for the right business structure
Here’s a rundown of how each business structure can impact your tax bill:
- S-Corporations
This helps you avoid double taxation, because as the owner of the business, all profits and losses are allowed to pass through to your personal tax return.
- LLC
This structure affords you flexibility with regards to how you wish to be taxed.
- C-Corporations
Although this structure can be beneficial thanks to a flat corporate tax rate, the risk of double taxation is also present.
Ultimately, working with a tax professional can help you determine which of any of these structures would be the most beneficial for you and your business.
Deferring income and accelerating expenses
For a business that is cash based, invoices and payments can be deferred until the following tax year, while prepaid goods and services can be accelerated to the current year to help lower your taxable income.
Taking advantage of tax credits
The following credits could help you minimize your tax liability, but you should consult with a tax professional before applying:
- R&D
This applies to businesses making investments in technology, innovation or product development.
- Energy efficiency
This is for upgrades that are eco-friendly to buildings or equipment.
- Small business health care
If you meet eligibility criteria and offer health insurance.
You don’t have to cut corners to reduce your business taxes legitimately; by working with professional tax services in Miami, you can easily make smarter, more strategic plans that involve advantageous use of the tax code.
No matter whether you’re going it alone as a solo entrepreneur, or heading up a quickly expanding enterprise, with the strategies outlined above, coupled with sound advice and guidance, you can lower your tax burden and enhance your overall financial health.