There’s an established principle in business that it isn’t always what you earn that matters but also what you keep. Therefore taking advantage of each possible tax break applicable is key to keeping as many dollars in the coffers as possible.
There are various ways of businesses saving on the amount of tax they pay, but not all are taken up so many small and large concerns end up paying more to the IRS (Internal Revenue Service) than they need to each year.
Easy to administer and track:
In some cases such as, say, running a home office business owners feel it will be too complicated or time-consuming to claim some home expenses against tax but this needn’t be the case. Similarly, organizations using contractors or freelancers can easily track what they’re paying them and claim accordingly using up to date finance software and specialist forms.
A tax specialist such as an accountant is worth hiring as they identify what you’re entitled to claim for and work it out for you – and there’s a tax saving straight away as their fees are tax deductible.
Tax breaks to take advantage of:
Many home-based business owners miss tax saving opportunities under this heading.
A percentage of household bills such as heating, electricity, home phone, and internet connection is usually deductible as are a percentage of possibly rent, mortgage interest, and taxes that would reflect the percentage of business use.
Some full costs such as redecorating the home office could likely be claimed.
Another area where some businesses don’t claim what they should.
It’s entirely possible to deduct your auto expenses from your yearly tax liability – you may be shocked at how many business miles your vehicle covers. You’ll need to keep basic records of mileage and keep track of costs such as servicing and maintenance and establish a percentage value for how much of your vehicle’s use is related to business.
An accountant can help here in establishing what can and cannot be claimed for business; for example, a basic commute back and forth may not be allowable while a trip out of town to visit clients or suppliers likely will be.
Carrying over tax deductions:
Often neglected, these can be a great way of saving tax.
If a business experiences a capital loss, operating loss or incurred a lot of expenses in one year and they’re not fully used up in deductions, the remainder can be carried over to the following year.
Again, a switched on accountant allied to the use of modern accounting software can spot these, track them and ensure you don’t miss out on saving tax that you’re entitled to.
Employee benefit packages:
Along with making a workplace more appealing for an employee through offering perks such as educational help and contributions to their retirement fund plans, these are usually deductible.
The self-employed should also be aware of their retirement plan options and deductions they can claim based on contributions to their own retirement funds.
Rental and leasing of equipment:
That expensive new piece of tech may help a business but maybe they’re put off by the cost.
Perhaps renting or leasing makes more sense? Not only does it mean smaller monthly payments instead of a parting company with a large lump sum, but these rental or lease payments are usually fully deductible.
Ultimately it’s a matter of businesses being organized in tracking what they spend, what expenses they can claim for an accurate record keeping. This coupled with help from an accounting professional will help save more of what money is generated.
- Top 5 Small Business Tax Tips to Save Money
- Top 10 Tax Deductions Every Business Owner Should Be Aware of in 2018