Tax season is a daunting affair, especially for small businesses. However, some strategies can help small business owners and self-employed persons better handle their accounting and taxing practices. So, without further ado, let us look at some simple ways a small business can improve its taxes.
- Fund a Retirement Plan – Setting up and funding a retirement plan can save small business owners a massive sum of money. The catch is to ensure that you opt for a qualified plan to maximize your tax savings. Moreover, several retirement funds options are also available, and you can choose depending on your personal and professional goals, financial envisioning, needs, and so forth.
- Opt for Digital Record-Keeping – Although it might seem like a minor hindrance, paper clutter can take a toll on you while preparing your tax records for the upcoming financial year. Thus, the solution is to digitize all your files so they are indexed at your disposal. It is also a wise decision to backup digital files to protect them in case of security breaches, damages, etc.
- Reduce your business income by taking advantage of tax credits – Businesses and individuals are encouraged to engage in certain activities and avoid others through tax credits from the federal government. For example, you may be able to claim tax deductions for recruiting staff for your small business, pursuing a greener path, and making it easier for people with disabilities to work. Mose of the strategies is a part of the General Business Credit, which is quite extensive. Thus, there is a huge possibility that you qualify for some terms under the mechanism.
- Track Your Expenses – Many business expenses are tax-deductible but mandate recording keeping for tax purposes. Therefore, it is imperative that you retain all your business-related receipts and take a few seconds to jot a note on the receipt to remember why you made the particular purchase.
- Account Automation – Automating your receivable and payable accounts is an excellent way to streamline your accounting process this upcoming tax season. You can find a plethora of accounting automation software in the web market.
- The depreciation of business equipment, machinery, automobiles, and even real estate purchases can be written off as tax deductions for small businesses. In the first year that you own and utilize the equipment, you might choose to deduct your expenses. Bonus depreciation is another typical form of accelerated depreciation under this technique.
- As for Donation Receipts - Most charities will gleefully hand over your small business a receipt when they donate, but you might have to ask beforehand. The receipts will help you when you file your taxes. In most situations, charitable contributions are 100 percent deductible on your taxes.
In conclusion, as a small business owner, you can prepare your taxes for the upcoming year with full vigor and preparation by following the tips mentioned above and tricks.