If you have been running a business or are familiar with the ins and outs of it, then you must be aware of tax obligations as well. Taxes are part and parcel of running a business. If you are a newbie to the business arena, it is better first to familiarize yourself with the tax obligations before you start your business. It will prevent you from future stressful situations. You should be thoroughly aware of the kind of business entity you own, what taxes you have to pay, the time of filing, and how much are you required to pay. To save yourself a lot of trouble and to reduce the amount of your business tax, you should be meticulous in the preparation of your tax returns.
Preparing the tax returns and tax management as a whole can be a stressful time, especially so if you have a small business. There are a variety of taxes that you have to pay, depending on the type of business you have.
- Income tax
- Employee tax
- Sales tax
- Excise tax
Your business category will determine what kind of charges you are required to pay. Sometimes it happens that you end up paying a significant chunk of your hard-earned income to taxes. It mostly happens due to the business owner’s unfamiliarity with how the whole tax system works and mismanagement of tax returns. The start and end of a tax year are crucial times when it comes to saving money on your taxes. Some changes were brought in the tax policy this year that can reduce the tax load. This article looks at some tips that can help business owners lessen the size of their business tax in 2019.
1- On-board Tax Advisor
It is always a good idea to have a tax advisor on board. Unless or until this area is your expertise, your business will significantly benefit from having a tax advisor. A tax advisor who knows your business will help you identify the areas where you can save your income. Chances are you may not have had the time to go through the tax bill in detail, thus missing out on several benefits accorded to businesses. If you have an onboard tax advisor, whose work requires him/her to be aware of even the smallest change, you will be able to save much when it comes to taxes. A tax lawyer in Brooklyn is one example where everything from tax advice to tax filing is on offer for those looking for such services.
2- Retirement Plan
Set up an IRS qualified retirement plan for your employees and yourself. You have to set aside an amount for the retirement fund according to IRS guidelines. The amount you put aside for the retirement fund will be the business’s income that will not come under the tax net. The fund amount is not taxable until it starts getting used, which in most cases won’t be for years. It does not mean that you are escaping the taxes due to the state. You are just delaying it and the process reducing the size of your business tax.
3- Tax Software
In the year 2019, it will be foolish not to make use of technology when it makes things even more accessible. If you have a small workforce and have to manage the taxes on your own, this means you do not have a person or team dedicated to this vital task. In this scenario, it makes perfect sense to use tax software to prepare and file your taxes. IRS has reported that taxations using the online system has fewer errors as compared to the paper filing system. It is much more convenient to keep a record of your tax returns on a computer. You will not be losing a receipt or asking someone to go through a stack of papers.
4- Depreciation Deduction
Your business can take advantage of depreciation deduction if you are buying equipment or vehicles for your business or using the business income to give gifts, awards, and bonuses to employees. Consult your tax advisor to learn about the exact guidelines in this regard. If you have recently purchased any assets for your business, then you can also benefit from the new tax bill.
5- Tax Credits
Tax credits can help you considerably reduce the size of your business tax. However, for that, you need to be aware of what areas the government provides those credits. These credits help reduce the amount of taxable business income. You can take tax credits for employee healthcare provision, for research, for hiring, for employee family leave benefits, and for sustainable business practices.
6- Write off Bad Debts
If someone owes you a debt, and at the time of filing your returns, it is apparent that those debts will not be available on time. You can list them as bad debts. These bad debts will be deducted from your business income and thus are not taxable. Make sure that you have the available proof to write off the debts you deducted as bad debts.
7- Vehicle Expenses
If you are using a car or any other vehicle for business purposes, you can deduct the fuel expenses and related expenses from your taxable income. You will need to calculate the miles traveled on the automobile for business purposes. Then determine the fuel cost for the miles traveled and deduct the fuel amount from your total income. This cost can vary from vehicle to vehicle, so make sure you do the proper calculations before deducting from your income.
You save yourself a lot of stress and hassle if you are aware of the tax system. If you have the right knowledge and the right advisor, your business tax won’t ever be a worry for you.