10 Ways to Reduce Tax Burden for Your Small Business
FINANCE CORNER
By Dr. Cozette White
Everyone worries about taxes and looks for ways and means of reducing the tax burden. When you have a small business of your own you must remain updated on the tax laws that pertain to “small businesses.” As a business owner you must understand accounting systems and tax planning. Sit down with your accountant and plan ways of maintaining business expenses, filing receipts, planning on “tax saving” investments, and a strategy for running the business in the most beneficial way.
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According to law you can reduce your tax liability by hiring family members to carry out work in your business. Pay your children and spouse to perform assigned duties. This way you can shift from higher tax rates to lower ones.
Consider hiring independent contractors instead of employees. You will save on payroll taxes. However ensure that you meet the IRS’s criteria.
Think about “deferring income” postpone receiving money to January instead of December. This means that payments received will be up for “tax” calculations a year away. However ask your accountant’s advice as the benefits are dependent on profit and losses for the year and your corporate legal structure.
Take advantage of tax deductions allowed for charitable donations. Make donations in November or December instead of January so that you can include the donations for tax deductions in the current year.
Maximize your expenditure on equipment and office supplies. Buy in advance for a quarter and use the tax deductions allowed in the current fiscal year.
Include expenses of business related travel in the current year.
Pay all bills due before the end of the year. Payment to cell services, rent, insurance, and utilities related to the business can be included for accounting and applicable tax waivers.
Plan a retirement plan and make payments before the end of the year. This will reduce your income for the year and proportionately the tax due. Be sure to check on the limits. Plan a feasible and beneficial strategy with your accountant.
Be sure to deduct from your taxable income money paid to licensing fees, businesses taxes, and annual memberships to businesses related organizations. Be sure to deduct interest paid on borrowings for running the business and related fees. Insurance premiums paid to insure the business office and machinery are eligible for tax deductions. Make a list of your memberships and check which ones are eligible for tax deductions.
Check whether you have deducted management and administration expenses as well as money spent on maintenance and repairs of equipment.
Decide whether a cash accounting system or accrual one will benefit your business. The tax deductions are different depending on the system you use. When setting up your small business take the advice of a tax and accounting professional as to which accounting system would be most suitable.
More on Dr. Cozette M. White
Dr. Cozette M. White helps tax and accounting professional start and grow highly profitable virtual firms. She is an acclaimed best-selling author, nationally recognized finance and tax strategist, international speaker and philanthropist.
Dr. Cozette is the resident Money Matters Expert for Fox40. In 2017, Dr. Cozette was awarded the President’s Lifetime Achievement Award by President Barack Obama.
Read more about Cozette and the services offered via her website MyFinancialHome.com
Follow Dr. Cozette on LinkedIn and other platforms @cozettemwhite
