Depending on your personal feelings, tax time can either be a relieving or a highly stressful time of the year. Most Americans are split on their feelings toward tax season.
If you’re operating a small business, tax time can often be even more complicated. The money you have to pay out can put pressure on your small business finances, which is why it’s important to try and lessen your overall tax liability.
What are some of the best ways to reduce the business taxes you might owe? Read on and we’ll walk you through the basics.
Take Advantage of Tax Deductions
Tax deductions are a way to reduce your taxable business income, which can lower your tax liability.
There are many deductions available to businesses. This includes deductions for business-related travel, equipment purchases, and charitable contributions. Depending on the type of work you do, there might be a wealth of deductions available to you.
This is often not a one-size-fits-all scenario, so it’s important to do research based on the specifics of your business.
Be sure to keep accurate records of your expenses and consult with a tax professional to ensure that you’re taking advantage of all available deductions.
Work With Independent Contractors
Hiring independent contractors instead of employees can be a tax-efficient way to reduce your tax liability. It can also make your bookkeeping work a bit easier.
If there are certain positions at your company that you don’t need to have as full-time employees, outsourcing this work might prove beneficial during tax season.
Independent contractors are responsible for paying their own taxes. This means you don’t have to withhold payroll taxes or provide benefits such as health insurance.
Additionally, you can deduct the cost of their services as a business expense. This can also help lower your taxable income.
Use a Retirement Plan
Contributing to a retirement plan, such as a 401(k) or a Simplified Employee Pension (SEP) plan, can reduce your tax liability.
These plans allow you to defer a portion of your income, which can lower your taxable income and reduce your tax bill.
Additionally, employer contributions to these plans are tax-deductible, which can further reduce your tax liability. There are many retirement plan options available, and you can read about them via the IRS website.
Determining what will be best for your staff and your business is a task worth taking on ahead of tax season.
Lowering Your Tax Liability
If you’re running a business, focusing on saving money is an everyday task. Determining how best to lower your tax liability can be a major part of this work.
The above are just a few ways to consider lessening the burden of your business taxes. There will be different options for every business, so it’s important to do your own research as well.
Need help managing your taxes? Looking for more ways to save? Give us a call anytime and speak with a professional who’s ready to help.