The thought of tax liabilities is beginning to settle in your mind because of stocks, real estate or earned income gained throughout the fiscal year. It’s normal for new business owners to make mistakes in filing income taxes for your company. However, existing business owners can learn a few things from a knowledgeable tax accountant that can improve a company’s bottom line.
Get your 2018 business tax return prepared the right way with these valuable tips that will help you save money:
1. Establish a tax-deferred investment
Explore the idea of transferring funds to a holding company with no tax payments. The tax will be paid in the future, but your capital to invest will increase.
2. Know the difference between business vs. capital expenses
When you have expenses that help you earn money, it is a business expense that you can deduct. Capital expenses are things like a company vehicle or equipment that depreciates with time.
3. Educate yourself on Section 179
This part of the Internal Revenue Code allows you to write off purchases that include software and automobiles in a time of one year versus filing it as a depreciation over several years.
4. Establish an employee healthcare program
If you have less than 25 employees with average wages of $52,000, you can deduct 50% of the paid premiums.
5. Take advantage of insurance premiums
If you pay your health insurance premiums, it’s tax deductible if it’s less than your net profit. Remember, it’ll not apply if you’re eligible for your spouse’s employee medical plan.
6. Subscribe to magazines
Do you have a reception area? Provide your customers with some reading materials. Note that recently, deductions related to materials involving investment expenses, unreimbursed employee expenses, job search expenses, and hobby expenses have been temporarily eliminated.
7. Continue your education
When you study a business-related topic and spend money on courses, books and professional publications, the cost of materials can be deducted.
8. Deduct your startup costs
When starting up a new business, you can deduct $5,000 for expenses and $5,000 in organizational costs (i.e., legal fees, promotional fees).
9. Buy gifts for both loyal customers and employees
Show employees your appreciation with a gift card up to $25 every year, and you can deduct it on your next tax refund.
10. Employ Independent Contractors
Hiring an independent contractor will allow you to withhold Social Security, Medicare taxes, state or federal income taxes on business earnings.
11. Give to charities
The moment you donate an old vehicle or computer to a not-for-profit organization, you can reduce your tax costs.
12. Employ your children
When you hire family to work in your business, consider a direct transfer to a Roth IRA or a 529 college plan that has a tax shelter. Once your child earns $6,300, it is tax-free. However, the next $9,225 will be taxed at 10 percent.
13. Set up a home-based office
Have a spare room at the house? You can dub it a business annex and run aspects of your business from it. Better still, you can deduct your mortgage, taxes, rent, utilities and office expenses.
14. Go ‘Green’
If you do work from home or lease an office, purchase energy saving investments that will amortize or depreciate, e.g. solar technology, small wind turbines or fuel cells.
15. Use the technology available
Ditch the pen and paper and start using a tax software that will accurately calculate your payroll taxes. These programs help you easily avoid the more common mistakes made.
16. Bad Business Debt
Not all business owners want to admit bad decisions but it can pay off. Ask your accountant about income tax deductions on bad debt and in a timely manner. It only applies to existing debt at the time you write it off.
17. Don’t forget the easy stuff
The business deductibles most people seem to forget are travel expenses, car mileage, business clothing, client gifts, traffic tickets, or an at home office.
We hope that these tax tips help you for the next tax return for years to come. You can print this article and hand it to your accounting team or accountant to help you receive a tax refund you deserve.