With estimates saying that more than 90% of small businesses are overpaying on their taxes, companies who can afford it the least are leaving money on the table. If you aren’t sure whether you could be in that vast majority, thankfully there are some small business tax tips to help.
Follow these 5 tips to ensure that your small business survives those tough times by only paying as much as you owe.
1. Don’t Be Afraid of Tax Software
If you’re still trying to do your taxes DIY without any help, you should at least use the software. In the modern era, you shouldn’t be doing anything the hard way. As a small business owner, you’ve already got enough on your plate.
Search for “tax software” online, and you’ll find products like Turbo Tax and other similar software. Choose the one that fits your budget and is sure that you get all the features you need for the price. You’ll find that products that are more robust might require a subscription as opposed to a one-time fee.
Only you can determine whether or not it’s worth it.
With digital software the help aid your accounting, you can easily produce your returns. Rather than do the hard work of entering information from digital files to paper, you can skip a step with properly integrated software.
When you file digitally, you’re less likely to make mistakes. With one in five paper returns containing mistakes, that number drops down to 1% for digital returns filed.
2. Keeping Track of Spending Helps With Deductions
If you’re waiting until the end of the year to drag out a shoebox full of receipts to your accountant, you’re doing it all wrong.
With most of your transactions digitized, you need to use a tool like Quicken or Mint to ensure that you’re cutting time off of your tax preparation. This is especially important if you’re using a tax preparer. When you hand them a box of receipts to go through at $150 per hour, you’re adding an unnecessary expense to your business.
Take the time to enter each transaction as it comes in, no matter how big or small. When you put off work until it’s time to do your taxes, you set yourself up for failure, or at the very least, a serious expense.
Organizing hundreds or thousands of receipts at once means that you’re bound to miss one or two. Rather than make any mistakes that could cause you to lose money, put aside some time at the end of every week to mark your expenditures.
3. Make Retirement Accounts a Priority
If you haven’t taken the time to plan out your retirement, you could be wasting time and money by piling it all into a savings account. If you’re a small business owner or self-employed, you could have access to traditional IRAs as well as something like a 401(k). You could be putting away $55,000 a year with all of these things combined.
When you contribute to these plans, you can qualify for a tax deduction. Money stacked in a savings account won’t be eligible for any kind of write off.
Talking to a financial planner or CPA, even if you don’t hire them on a permanent basis, can help you to explore what kinds of options are available. By making good decisions about your retirement, you’re making good decisions about your tax bill.
You’ll have the double reward of having a secure retirement while also lowering your annual tax bill.
4. Deduct Your Home Office
When you work from home, you could be deducting your home office. Many people are wary of this if they’ve never explored this option before and feel like it might raise a red flag.
However, with the rise of the gig economy and self-employment, more people are conducting their business from home than ever before. If you legitimately have office equipment and use your home as a workspace, you could be writing it off.
You could be saving a surprising amount of money if you take advantage of this deduction.
You’ll have to break out a tape measure to see what portion of your square footage is dedicated to business but it will surely pay off. Even if you run a cleaning company, space that’s dedicated to storing supplies, or the room where you design logos and store office supplies counts.
If you find that you still owe after your deductions, try out a Michigan taxes payment plan to keep your payments manageable.
5. Your Car Could Qualify
If you didn’t know already, your car could be the source of a lot of tax write-offs. If you use your car for business, you could be deducting mileage, fuel, and repairs.
When you drive your presentation supplies or the supplies you need to do your job from your office to a client, you’re using your car for business purposes. When you’re driving from your office to a downtown office to meet a potential client, you’re using your car for business.
Once you start thinking about the ways you’re using your car for business, you’ll find that there are a lot of opportunities for a deduction.
Understanding which percentage of your car’s mileage is related to your business might take some effort, but it could be well worth it. Some people might find that over 90% of their car usage is related to their work. If you live in an area where you mostly walk to the grocery store or to see friends and only hop in the car for work, start keeping track of your mileage.
Small Business Tax Tips Help You Survive :
It’s hard for small businesses to survive in the modern era with just about every major retailer, media company, or conglomerate biting at your heels. With some small business tax tips on your side, you can make it through the hard times and prepare yourself for the future.
If you’re worried about making sure your business thrives for decades to come, check out our guide to supporting your business through thick and thin.
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