Important Tax-Saving Tips for Small Business Owners in the US
There are changes in the US tax policy each year. It is prudent for entrepreneurs to ensure that their businesses are well positioned for tax returns with every new wave of laws. As such, the ideal practice is to acknowledge and follow the best tax practices. The changes in tax laws may significantly affect deductions and returns. Consequently, small business owners in the US may pay huge amounts of taxes. Even so, there are some ways entrepreneurs can reduce the amount they pay as tax. It would be best to talk to our team of tax experts who can help in reducing payable tax. Below are some of the most common tax-saving tips that small business owners in the US should consider.
Avoid penalties from late payments
Submitting late tax returns is one of the most common ways that taxpayers incur tax penalties from the IRS. Avoiding penalties may be a simple concept but still an essential tax-saving tip. Ideally, small business owners may avoid late payments in a variety of ways. For instance, getting tax documents early in the year is the first step to preventing last-minute rushes. That reduces that chance of unforeseen inconveniences while filing tax returns. Tax experts recommend that an entrepreneur can utilize short-term capital and tax debt loans to make tax payments on time.
Do not overlook benefit plans for employees
According to the IRS, employers can take a tax deduction on the business tax returns for providing benefits to employees. In this case, the total cost of providing the benefits is considered in the calculation of the tax deduction. More details about the types of benefits deductible and restriction or limitations on employee benefits are on the IRS website. For every entrepreneur in the US, it is vital to understand how different benefits may affect the business.
Buy Equipment, Vehicles for Depreciation Deductions
Each year, businesses have the opportunity to take write-offs on purchases of business assets such as equipment and vehicles. These write-offs are often referred to as depreciation and can be taken more quickly. Sometimes an entrepreneur can take the entire cost in the first year and use the equipment. Arguably, two of the most common types of accelerated depreciation are section 179 deductions and bonus depreciation. Section 179 deductions allow business owners to take costs of buying assets immediately. On the other hand, bonus depreciation is an extra benefit for buying new assets. According to the IRS, there is an increase in both of these types of depreciation.
Keep Track of Receipts and Expenses
Tracking receipts is not an easy thing for most people to do. However, properly organizing and tracking receipts is a good accounting practice that makes various things easier. For instance, it makes it simple to log deductions accurately. Additionally, receipts can prove very essential in the event of auditing. Providing receipts is always taken as proof that validates the true costs of past transactions. Even apart from this, receipts are necessary for tax purposes. They serve as part of the evidence of expenditure that is included when computing to business tax returns.
Exploit Recent Tax Law Changes
Effective for 2018 taxes, the 2017 Tax Cuts and Jobs Act created several features that can lower tax bills for small businesses in the US. As an entrepreneur, one can be able to take advantage of a 20% tax deduction on business net income. That is only possible if the business is a pass-through entity and not a corporation. Notably, this deduction is in addition to ordinary business expense deductions. One qualifies if your taxable income is below $157,500 if you are single or $315,000 if you are married and files tax returns jointly. There are other several restrictions and limitations and it would be best to check with a tax preparer about eligibility.
Acquire Tax Software
Tax planning software is necessary for small business owners, not only in the US but also across the globe. Utilizing tax software will help in making the preparation and filing of taxes online much easier. This is an era that everyone is ditching papers. Why should you not? In 2018, the IRS reported that less than 1% of online tax returns have errors. Nevertheless, this number may escalate to about 20% when taxpayers file using paper returns. If filing online sounds like too much work, it would be best to hire a tax professional. Note that even with the best CPA, one may pay more in taxes if there is no right information about the business expenses. Any small, missed deduction can really add up to something that may cause a huge tax amount.
Prior to making any decision that can affect your business tax return, one should consult a tax professional. At Mount Bonnell advisors, we can help you get in touch with the best tax professional at any time of the year.
