Whether small or big, running a business is not easy, not to mention the complexities of tax filing each year. However, what can help you out is working with your financial accountant not only when preparing your tax returns but throughout the year. If you are not an expert in financial matters, making big financial decisions in your business without consulting an accountant or advisor could leave you with money risks that may affect your business in the long run. Here are strategies you can use to ensure you save more on your business tax.
Engage an expert
It is essential to consult with a business tax expert before making any decisions that could affect your business tax returns. Consider engaging a tax professional such as Liston Newton Advisory to advise you regarding your business tax professionally.
If you have an accountant, they should offer more than just preparing your financial records and filing returns. If that is the only service they can offer, it is unfortunate that they are not the right person for your business. Your accountant should be available throughout the year to monitor your income and spending, gross and net profits, and ensure there are no cash flow problems.
Have adequate records
Good record-keeping throughout the year helps you to ensure that your tax return is accurate. Without adequate financial records, there is no way of verifying anything. For instance, when you have inadequate records, you could be leaving out some deductions on the table or putting yourself at the risk of a tax audit. As a business, it is beneficial to invest in a proper financial record-keeping system such as software that simplifies storage and access. Plus an accounting software is user-friendly, affordable, and helps you track all your income and spending.
Separate business and personal finances
Even if you are good at recording your business expenses and personal ones correctly, you should separate both of them. That is because the tax authorities could begin looking into your accounts just because you mingle the money with your business expenses. It is vital to have a different bank account for your business and ensure you only run business expenses and spending on that account.
Classify your business correctly.
Classifying your business wrongly could leave you paying more taxes than you're supposed to. The different classifications of corporations, such as the sole proprietor, limited liability partnership, limited liability company, etc., have different taxation effects. Here, you can engage an attorney or a professional accountant to determine how your business can be classified.
Fund a retirement plan
Funding a retirement plan for yourself and your employees can save you more money on taxes. However, you have to ensure it is a qualified retirement plan to take advantage of the tax benefits. Generally, there are many plans you can consider depending on your needs, goals, and your business as a whole. Engaging a financial advisor can help you decide on which suits you best.
You can hire a company to help you manage your payroll. However, you have to make sure it is reputable. Some business owners have hired low-cost payroll services only to realize later that it doesn't remit payroll taxes for the company leaving the business owner on the hook for payroll taxes. So, manage your payroll with a reputable company.
The final words
Since businesses are different, and tax laws vary, the above tips on saving more on taxes are subject to discussion with your accountant or tax advisor.