When it comes to running a small business, owners must manage many factors every day. In addition to running the business and taking care of clientele, there are many tasks to accomplish to maintain things in the background, like accounting, finances, employees, and more. Anything you can do as a small business owner to reduce stress and take a load off, especially during tax season, should be done. That’s right, it is time to think about tax season. Small business accounting is critical for long-term financial success.
As a small business owner, let’s discover how to maximize your tax return and lower your taxes owed in this upcoming 2023 tax season.
The Importance of Tax Planning for Small Businesses
Tax preparation is always key to stress-free tax filing on both a business and personal level. Utilizing accounting services for small businesses can also benefit your business without having to do any accounting work yourself. However, no matter what approach you take to file your taxes, you must have all your documents ready. This will help ensure that you file them correctly the first time. Making errors with the IRS will only cost you time, money, and many headaches.
Different Tax Strategies for Small Business Accounting
There are various tax benefits and write-offs available for small businesses. However, a qualified accountant can inform you of which tax benefits you can claim. For example, many business taxpayers are eligible for an excise tax depending on the industry and products sold.
Furthermore, you must know the ins and outs of tax filing to understand what qualifies for extra deductions and tax breaks versus what doesn’t. If you start preparing now, you can file easily when tax season is fully underway. It is never too early to get started, and we have prepared a list for you to start looking for those savings.
5 Ways to Reduce Taxes – Simpler Than Ever!
What are the best methods to reduce your taxes? Let’s dive right in and learn more information. Here are five different ways you can reduce your taxes as a small business owner.
1. Claim deductions where you can, like the qualified business deduction (QBI)
This one is for those of you operating LLCs, working as freelancers, or independent contractors! If you report your business income on a personal tax filing, you could deduct as much as 20% of your tax return. This is known as the pass-through deduction, and there are strict guidelines to follow, so make sure you understand the form and its nuances before filing.
2. Retirement Saving and Preparation
Saving for retirement is always a way to have a nice tax break since most contributions are pre-tax. There is a range of retirement plan options that are worth using. This strategy of savings goes even further for small business owners.
In addition to Roth IRAs, choices include a single 401k for those self-employed with no employees and the SEP IRA (Self-Employed Person Individual Retirement Account). Just because you own your own business doesn’t mean you can’t save for retirement or benefit from it during tax season.
3. Personal Vehicle for Business Use
Like many tax write-offs, a vehicle purchased as a business expense, or a personal vehicle used for work purposes, is no exception to the rule. Track all of your expenses or use the standard mileage rate, and through either option is major savings on those tax returns, guaranteed. Who knew traveling to in-person meetings or conferences could benefit you more than just social networking and connecting with others? Just be sure to take your “business” vehicle when traveling for work purposes.
4. Health Insurance
For those of you paying your own health insurance due to being self-employed, incurring those costs can be a huge burden. Thankfully, there is a way to deduct major savings during tax season with the IRS in this regard, too. Depending on your qualifications for this saving tip, you could deduct all or most of your health insurance premium.
5. Home Office Deductions
Home office deductions are another type of write-off during tax season. As if working from home couldn’t get any better. Just like using a vehicle for business, setting up shop from home can help lower your taxes. You can claim items purchased for your office as business expenses, and write off items like the Internet or a phone bill.
The above options are not an exhaustive list. Many times, tax breaks and savings are situation-specific and unique to your needs as a business owner. The best way to figure those out is through accounting services for small businesses and tax professionals who understand small business taxes.
File for an Extension to Give Yourself More Time on Taxes
If small business accounting overwhelms you and you feel like you need more time, then simply file for an extension. All you have to do is complete the IRS form 7004 correctly and before the tax deadline of April 18, 2023, to get an automatic 6-month extension on your business income filing. It is as simple as that. Also, when in doubt, ask for help from a professional tax advisor to ensure all your bases are covered.
A Professional Tax Advisor Can Help You Reduce Your Tax Bill and More!
Look no further for the best tax support you could ever need. Professional tax advisors at Waters Hardy are here to help support your tax filing and small business accounting. We are experts in what we do and work hard to ensure you are stress-free year-round, especially during tax season. Start your tax planning and preparation today.