Legal Tricks to Maximize your Business Tax Opportunities
Business tax preparation can be just as daunting for a business owner as it is for an individual taxpayer. Business tax laws are complex, and it’s often wise to consult with a tax attorney or tax accountant. With several taxes to take into consideration, a business can easily find itself in a financial bind if not properly prepared. Luckily, there are ways to lower business tax and ensure that your business is pulling all the possible (and, most importantly, legal) stops to enter tax season with a clear mind.
Here are 3 tricks to securing the money your business deserves
1. Retirement/Health Account Contributions
Maximizing your use of 401k/IRA’s will allow you to deduct from your taxable income the amount paid into the account, thus reducing your total taxable income (for more information on your retirement plan options, please review IRS Publication 560, Retirement Plans for Small Business on IRS website).
Increasing contribution to your employees’ health insurance costs can also help lower your business tax, as well as provide compensation and a money saving alternative to salary increases. This is because a contribution increase of “x” dollars to an employee’s medical insurance eliminates a number of taxes that an employee would otherwise have to pay if the increase was attributed to salary increase.
2. “Bunch” Deductions
Bunching itemized deductions can help reduce tax liability and increase a business’ tax benefits. Maximizing your business’ expenses at the end of the year, rather than the beginning of the next, will help ensure that these expenses fall within the necessary income thresholds for some deduction categories and will earn you a deduction in the current tax year for those expenses. For instance, if your business is planning on a major expenditure, your best option would be to making the purchase at end of year; or, if your business spends “x” amount of dollars in office supplies monthly, forecasting for the next few months and bunching this expense into one large purchase will help lower business tax.
It is also beneficial to consider all possible deductions for your business—travel expenses (i.e vehicle and business trips), employee training, equipment repairs and losses due to theft are a few areas to consider when reviewing tax deductions.
3. Give Back
Donating to charity is a sure way to lower your business tax bill. By first ensuring that the charity in question is qualified and all donations are tax deductible, donating unwanted equipment can earn you a tax incentive from the IRS. Keep in mind, however, that the IRS requires written acknowledgement from the organization for contributions of or valued up to $250.
By implementing these simple tricks at tax time, your business can find itself drastically reducing taxable income in a safe and legal way. However, certain applicable tax deductions vary by business, so it is important to understand what your business can deduct from taxable income. For more information regarding your business taxes, and to learn about other beneficial tax deductions, call Acosta Tax and Advisory, PA for a free consultation.
*this is personal legal or tax advice – please consult with a CPA to discuss your personal situation.