Since tax time is a time when a lot of money leaves your coffers, you might want to look into a few top money saving tips for tax time so that you can save some real cash. Taxes tend to be a headache for most companies, not only because you have to pay massive sums to the government but also because they take time to sort out and file. Tax time is almost always stress time, but this doesn’t necessarily have to be the case. As a business owner, you need to be aware of the type of taxes you need to pay. These differ from state to state, but if you do your background research well, you’ll see that there are a lot of ways to claim back your money in your state through the right deductions.Let’s look at some of the top money saving tax time tips!
Maintaining Clean and Proper Records
One of the top money saving tips for tax time is this: maintenance and organization of records at all times. Most small and medium companies find themselves scrambling to organize their books at the beginning on the year so they can file on time. This leads to the accountants overlooking opportunities for claiming specific deductions or tax incentives, and thus losing out on money saved. Also, if your books are properly organized, you won’t have to pay your tax-preparers a lot of money – such services usually charge per hour so you want to make the most of the time!
Is your business a Limited Liability Company (LLC)?
Whether you’re a sole proprietor, an entrepreneur who’s just begun or a small firm, it’s in your best interests to register yourself as an LLC. This is because LLCs enjoy significant tax savings in the form of pass-through taxes. As an owner in an LLC, you’ll not only avoid paying the self-employment tax but you’ll also gain the benefit of paying your taxes only on your share of profits or losses. This means that as an LLC, your company is likely to be looked at as a corporation. In doing so, you’ll only pay taxes on the salary you get as an employee of the company and not on the entire profit of the firm. To qualify for these benefits, you can file your LLC as an S Corporation with Tax Election Form 2553.
Claiming the Right Deductions
As a tax payer, you need to aware of the top money saving tips for tax time. This encompasses claiming deductions as and when possible. For example, if you’re working from home and have put aside an office that you’re using for your work, you can easily qualify for a home office deduction. Home office deductions are easy to claim if you fulfill the IRS requirements: that the home office be your principal base of doing business and that you spend quite a bit of time in there conducting business affairs. Deductions can also come into effect if you provide your employees with gifts, awards or bonuses. All of these may be tax-deductible to some percentage. It’s best to consult with your accountant and tax professional to determine the amount of savings you can have in this manner.
Top Money Saving Tips For Tax Time is Making Use of Tax Credits
As a small business owner, you might want to look into tax credits afforded by the IRS so you can save money during tax time. There are different types of tax credits that you can benefit from: from going green to providing paid family leave to employees, and even for carrying out research and development on existing and new products! Other tax credits can be gained through providing access to healthcare for employees, providing access to disabled persons, employing war veterans and buying an alternative fuel vehicle for your business, to mention a few.
Set Up a Tax-Deferred Retirement Plan for You and Your Employees
As someone who owns a small business, one of the best ways to save on tax is to fund your own retirement plan. You can use the IRS guidelines for this, which may end up saving you a hefty chunk of cash. When you set up the plan, you get to claim the deduction. However, since this tax benefit is for a retirement plan, the tax savings have to be kept in a retirement account until the age pre-determined for your retirement.