For new small business owners running a Limited Liability Company (LLC), one of the biggest drivers of decision-making is the goal of cutting costs. Due to their limited resources, these companies are often looking for ways to make the most impact with the resources available to them. Yet, in many cases, these businesses fail to explore the possibility that they could save significant amounts of money on their business taxes.
In fact, you don’t need to resort to clever accounting to save some money on your taxes. With just a few simple tax savings tips, you can file your business tax return with ease and save money in the process. Here’s a quick rundown of some tax-savings hacks that small business owners often miss.
1. Register Your Business as an LLC
If you have already registered your business as an LLC, you probably know all about tax breaks that accompany the process. When you register your LLC, you protect yourself and your company by establishing them as separate entities in the eyes of the law, effectively securing limited personal liability. What results is a distinctive combination of tax breaks tied to your business expenses, professional development, employee training and more. Filing as an LLC alone may not be enough to completely offset your business taxes, but it is a critical first step.
2. Leverage Available Tax Deductions
As a small business owner, you should know exactly how to leverage your expenses when tax season comes around. Many of the largest and most integral business expenses are actually tax deductible. Did you know you can claim a home office on your taxes? Many businesses miss the opportunity to include such expenses as their mileage, office furniture and other equipment in their tax deductions. Under Section 179, the IRS allows businesses to claim such items as business expenses, provided they meet certain criteria and fit within the parameters of your business.
3. Keep Your Files Organized
We’ve all been there. Tax season rolls around, and in a frenzy, you find yourself scrambling to get all your affairs in order. Receipts need to be found; amounts need to be calculated. But consider how easy it is for you to make mistakes when you approach tax filing from this angle. The likelihood that you’ll miss something essential and wind up paying the price for it later increases exponentially. So don’t wait until tax season to get organized. Establish a system that works, and you’ll be that much further along when the time comes to finally file your business taxes.
4. Work With Contractors/Freelancers
The workforce is evolving every year to become more inclusive of independent contractors and freelancers. Your business can benefit from working with these individuals too, since you are able to cut expenses both throughout the year and at tax time. Full employees cost a company like yours far more than just their salaries. These workers are entitled by law to overtime pay and health insurance, but you also incur expenses related to payroll taxes, social security and worker’s compensation. By only bringing on full-time employees when you absolutely must, you can keep your business expenses (and taxes) to a minimum.
5. Invest in Your Retirement Account
Even if you’re a long way from hitting retirement age, you should make it a priority to invest as much as you can in your retirement account. Your taxable income can be strategically reduced when you deposit money into a traditional or Roth IRA. These funds are not taxable until they are withdrawn (ideally at retirement age). How much a small business owner can contribute to these retirement savings accounts per taxpayer also depends on his or her age. So reach out to a financial advisor to nail down the details that work best for your financial situation.
6. File Using Proven Tax Software
When you’re a small business owner, it’s easy to get caught up in your own entrepreneurial spirit. But there are certain things you may still need help with — like filing your taxes. Sure, you could wing it and hope for the best, but with several leading tax filing software tools out there, there’s no reason why you should. Systems like TurboTax or H&R Block guide you through the entire process, ensuring that you don’t miss anything critical. Using this software also provides certain protections in the accuracy of your tax filing data that you would not otherwise enjoy working on your own.
7. Keep an Eye on the Tax Calendar
One of the absolute easiest tax filing tips is also one of the most effective. Many companies can decrease the amount they spend on business taxes simply by paying closer attention to the calendar during tax season. Whether it’s to observe the required tax deadlines or to file an extension in time, you can often significantly reduce your tax expenses by adhering to such rules. Thankfully, the IRS already has tools out there to make it easy to do just that. But you can also develop your own system to ensure that you don’t let such a careless move as missing a tax deadline interfere with your business.
With just a few strategic small business tax deductions, tax season will be a breeze for you and your company. Hopefully, the above tax savings tips have begun to help you consider the small actions that can add up to make a significant impact on your business taxes. Oftentimes, a bit of research and a watchful eye will take you a long way to implementing these tax savings hacks. You might even identify additional ways to bolster your tax savings.
If you need further assistance filing your business taxes, Incfile is here to help. We set out to provide business owners like you with the tools to successfully navigate today’s crowded business landscape. With our extensive resources, you’ll have a leg up on the competition. If you’re ready to learn more about how we can help form or manage your company, check out our website and get started today!