SUNDAY, NOVEMBER 14, 2021
Every small business owner worries about paying taxes and looks
for ways of reducing their tax burden. When you have a small
business of your own you must keep up date on your knowledge of
tax laws that pertain to “small businesses.” You must also clearly
understand accounting systems and tax planning.
The best place to start is to sit down with your accountant and plan
the different ways that you will maintain business expenses, filing
receipts, “tax saving” investments, and a strategy for running your
business in the most beneficial way.
Did you know that?
- 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.
- Hiring independent contractors instead of employees. You will
save on payroll taxes. However ensure that you meet the IRS’s
- You can 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.
- You can 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.
- If you 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.
- By setting up a retirement plan and making 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 you should use a cash accounting system or
accrual one Which one will benefit your business the most? Keep
in mind that the tax deductions are different depending on the
system you use.
When setting up your small business it is wise to seek out the
advice of a tax and accounting professional as to which
accounting system would be most suitable.