Tax planning is a vital aspect of business administration. You can save a significant amount of money if you take the time to understand your business and use the findings to create a comprehensive tax planning strategy. Here are a few tips that might come in handy:
- 1. Invest in tax software
- 2. Track deductible expenses
- 3. Deduct your home office
- 4. Hire family members
- 5. Avoid selling your old equipment
- 6. Avoid penalties for late filing
1. Invest in tax software
Tax software provides a cheap and effective way to keep track of all components of your tax front in real-time. It reduces the risk for error and makes it easy to monitor deductions that you would otherwise miss. You are also less likely to lose your filings, as they are automatically backed up in most tax provision software applications. When looking for tax software, consider comprehensiveness, ease of use, and relevance to your business model.
2. Track deductible expenses
Given the numerous goings-on in the modern office, it is not uncommon for businesses to lose some of their deductible expense receipts. This can add up to cause massive losses in the long run, so it’s worthwhile to have an app that lets you take photos of your receipts and store them chronologically. Some apps even let you keep records of expenses paid for by your online banking accounts and credit cards.
3. Deduct your home office
If you have a home office or some of your employees work remotely, you can add and deduct all expenses related to those remote offices. Common expenses that business owners overlook include internet service and other utilities, repairs, mortgage interest payments, and insurance. Note that you have to determine the portion of your home that is used for business. Proper tax software can assist with this.
4. Hire family members
There are not many differences between hiring family members and hiring outsiders. You have to treat both as employees, and they are all bound by the same regulations. However, things change a little bit when it comes to filing taxes. Hiring your wife, husband, child, or parent lowers your taxes significantly, but the amount you save will be determined by the kind of business you run.
5. Avoid selling your old equipment
When machinery and other equipment stop being useful to the business, most business owners choose to sell them. This might look like a great idea since it helps you get something out of the beat-up equipment, but it might not be from a tax standpoint. Before disposing of your property, check whether it is better to sell it or abandon it. The latter is considered an ordinary loss and, unlike a capital loss, might be fully deductible.
6. Avoid penalties for late filing
Lateness in filing tax returns exposes you to many penalties, most of which are monetary. As a responsible business owner, you want to ensure you avoid these extra expenses by paying your taxes on time.
There are many ways to cut back on business taxes, but these are some of the more universal ones. If you still don’t understand how taxation works, seek the guidance of a financial expert or corporate lawyer.
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