The 2018 US tax season will officially commence on January 29. The IRS has set deadlines for different tax forms. The deadlines for filing W-2 form, 1099-MISC (A) are January 31 and February 28, respectively. The deadline for filing S corporation tax returns (Form 1120-S and Form 1065) is March 15. Sole proprietorship and single member LLC owners can file taxes by April 17.
Small business owners can take different measures to minimize the taxes. You can consult with a professional small business tax accountant in Kissimmee to know about tax saving tips that can result in thousands of dollars in savings.
Here, we present 15 best tax saving strategies that can help business owners save a large sum that they can reinvest for the growth of their business.
1. Avoid Making Mistakes
The most obvious way to save on business taxes is by not making any mistakes. The IRS is notorious for imposing hefty fines in case a mistake is found in the report. One way to avoid a mistake is to double (or triple) check the tax returns to ensure 100 percent accuracy. Another more time-saving way to ensure accurate filing of taxes is to use payroll software for filing taxes.
Various payroll software such as Xero, Gusto, and QuickBooks allow you to prepare and file taxes for an additional fee. You can also use free tax preparation online services such as PayrollFree.com pay employees, calculate taxes, and make direct deposits. A small business tax accountant in Kissimmee will provide you with advice regarding the best payroll software for your business.
2. Save Tax Through Bonus Depreciation
You can save taxes by taking advantage of the bonus depreciation. The Path Act has extended the deadline for bonus depreciation to 2019. For the current tax year, the bonus depreciation is 40 percent. The depreciation will go down to 30 percent in 2019. You should consult your small business tax accountant in Kissimmee to know more about bonus depreciation.
3. Donate Instead of Discarding Unused Inventory
Another effective way to save on taxes is by donating unused inventory, instead of discarding it. Donating unused inventory that cannot be sold is better than spending cash for storing it. The donations of cash, supplies, and land are all deductible from total income. However, you should remember that donating more than $500 value goods have strict reporting rules. Your small business tax accountant in Kissimmee will help you in making the most of this opportunity.
4. Keep track of Transport Costs
Business-related transport expenses are deductible. Not many people know that the mileage for medical and charitable purposes is also deductible from the business income. That’s why it’s important to use a professional mileage and expense tracker tool to record transport costs for business or other purposes that are deductible.
Keep in mind that you can calculate transport expenses in two ways — based on actual expenses or on miles driven. Keeping a record of miles and transport expenses will ensure that you get full deductions for allowable business-related dedications. A small business tax accountant in Kissimmee will advise you on the best way to record and monitor transport costs. Mobile apps such as MileIQ can make it easy for you to figure out auto-related expenses at the end of the year.
5. Accelerate Expenses and Defer Revenues
Small business owners can also minimize taxes that are payable to the IRS by accelerating expenses and deferring revenues. This is a good strategy particularly if you operate on a cash basis and the profits are high.
Again, a small business tax accountant in Kissimmee will advise you on how you can benefit from this tax-saving strategy. One strategy is to consider billing late to customers. Another option is to pay in advance for services. This strategy can result in great cost savings for you.
6. Educational Costs
A little-known strategy to reduce annual taxes due is by dedication costs of educational classes, conferences, and seminars. You can also deduct costs associated with educational books, videotapes, and audiotapes. In addition, licensing and association fees are deductible. Any educational expenses that are related to your current business can be deducted from the business income.
7. Business Related Entertainment Expenses
A lot of people don’t know that business-related entertainment expenses are deductible. Taking out your vendors, customers, or potential employees for a meal or other entertainment option is a great way to build a business.
IRS allows dedication of up to 50 percent of meal and entertainment expenses from the business income. These expenses can be deducted as long as ‘business’ related matters are discussed before, after, or during the event. Also, the expenses should be ‘ordinary and necessary’. In other words, the costs should be reasonable and expected by a business entity. For instance, a bill of $5,000 is not considered ordinary or necessary.
In addition, you can deduct costs of meals that are provided to employees if they qualify as de minimis benefits, which are provided occasionally and are not small amounts. These expenses can be deducted in full from the business income.
Make sure you keep all the receipts related to business entertainment and education expenses with you as these will be required during an audit. Your small business tax accountant in Kissimmee will give you more information relating to business expenses that are deductible.
8. Petty Cash Expenses
Expenses on certain office supplies are tax deductible. Some of the expenses that can be deducted from the income tax include the postage and paperclips. Also, petty cash expenses such as the cost of coffee and beverages can be dedicated from the account. Again, a small business tax accountant in Kissimmee will inform you about the exact petty cash expenses that can be deducted from the business income.
9. Equipment Rental Costs
Not many business owners know that equipment rental costs are totally deductible. So, the next time it comes to purchasing an equipment, you should consider renting out the equipment. However, the benefit of the rental costs should be evaluated with the depreciation tax allowance. An experienced small business tax accountant in Kissimmee will provide you with the right advice to save on taxes. The small business tax accountant in Kissimmee will carry on calculations to find out whether it is better to rent out or purchase the equipment.
10. Professional Legal Fees
Many business owners are unaware that fees paid for professionals are deductible from income tax. Fees paid to accountants, lawyers, bookkeepers, and other outsourcing services are considered essential business expenses. Seeking expert advice will help you to improve your business process and also reduce the tax burden. Your small business tax accountant in Kissimmee will inform you about the exact type of professional expenses that are deductible. The small business tax accountant in Kissimmee will perform the required analysis to ensure that you make the most of such opportunities.
11. Deduct Home Office Expenses
Home office expenses can also be deducted from the business income. Business owners who designate a portion of their home for businesses can deduct all the expenses that relate to the business. You can calculate the deductions in two ways. The simple method is to multiply the square footage by a rate of $5. Keep in mind that the maximum footage allowed is 300 square feet. So, if you live in a 200 square feet house, you can deduct $1000 from the business income.
The regular method requires listing all the expenses including rent, utilities, property taxes and multiplying that by the percentage of the home used for the office space. Remember, that once you have chosen a method during a particular tax year, you cannot later change the method for the same year if you find that the alternate method provides more tax savings. So, it’s essential that you connect with a professional small business tax accountant in Kissimmee to know the right method to deduct home office expenses. The small business tax accountant in Kissimmee will offer information about the business expenses that you can deduct, as well as the right method that can result in maximum tax savings.
12. Buy a Vehicle for Business Use
Business owners should consider buying a vehicle for business use. They can deduct taxes for vehicles more than 6,000 pounds and less than 14,000 pounds. Vehicles that could qualify for a write-off include cars such as Toyota Land Cruiser, Mercedes-Benz GL-Class SUV, GMC Yukon, Ford Expedition, Chevy Tahoe, and Ford F-series Super Duty. For more information about how to use this strategy to minimize taxes, you should contact a small business tax accountant in Kissimmee. The small business tax accountant in Kissimmee can guide you regarding the right strategy to save on business taxes.
13. Consider Employing Your Children
Another strategy that you can use and should consult your small business tax accountant in Kissimmee about relates to employing children at the company. The strategy is often overlooked by business owners. The reality is that employing your kids can result in substantial tax savings. If you operate a business as a sole proprietorship or a partnership, and the child is less than 18 years old, you do not have to withhold any payroll taxes. What’s more, your child can use the standard deduction of up to $6,350 as earned income exempt from taxes. This strategy is not applicable for small business owners who operate using S or C corporation.
Make sure that the child you employ performs standard duties such as filing papers, sorting documents, or cleaning the office. They can also help in marketing your business through Twitter, Facebook, or Instagram.
You should follow standard procedures when employing your kids by creating bank accounts and paying them salaries at proper times. US labor laws allow children over 12 years to be employed. However, they can’t work more than 3 hours during a school day. Your small business tax accountant in Kissimmee will offer you more information regarding this strategy.
14. Open a Retirement Account
Thinking about the retirement is essential to living a comfortable life after retirement. It will help you to save taxes as well if you are a self-employed business owner. The money put into a retirement account is not taxed until it is withdrawn. Small business owners — who are under 50 years — are allowed to contribute up to $5,500 per year in either Roth IRA or 401(k) account. The limit is $6,500 for people who are over 50 years. Your small business tax accountant in Kissimmee will help you in calculating how much you can save in taxes by contributing to a retirement account.
15. Think Twice Before Selling your Old Equipment
The IRS allows you to fully deduct an ordinary loss on sale of equipment. So, if you want to sell equipment that no longer offers you ROI, you should consider abandoning it or selling it at a loss. Abandoning the old equipment will result in an ordinary loss that you can deduct from your taxable income.
The above are just some of the ways in which you can save on business taxes this year. Despite the popular view, IRS is rather generous towards business owners. There are a lot more business expenses apart from those mentioned above that are deductible from the income tax. You should partner with an experienced small business tax accountant in Kissimmee to know about more ways to reduce income taxes.
An experienced tax accountant will inform you about the tax incentives offered by IRS to business owners. In addition, the tax accountant can help you file the taxes within the due date with no error. This will help you save a lot of money due to reduced taxes and penalties that you can better invest in your business.