How To Reduce Business Taxes
1. Benefit by using tax filing software.
Though this recommendation might be an obvious choice for small enterprises who want to simplify their tax process, it still applies to sophisticated entrepreneurs. Most importantly it offers safeguards that might be otherwise beyond the rich of small business owners.
Tax software such as TurboTax, TaxSlayer, and H&R Block are instrumental when you process and file your taxes online. They guarantee accuracy and optimal refunds. Your taxes are simplified when you have an application that makes sure your tax return is accurate and assures full reimbursement of any penalties or fees charged. I’ve tried each of these choices. I prefer TaxSlayer. The other two are also solid options.
2. Maintain and order all receipts
Receipts provide a primary record of your expenditures throughout the financial year. Most of the receipts associated with purchases of goods and services qualify as deductibles against your taxable income. Depending on how your enterprise is structured, some deductions apply to specific cases, whereas others apply universally across structures. Keeping all receipts for the whole year is an enormous task, many of them may be misplaced or lost.
But there is a perfect solution for that. 1tapreceipts, an app, records, archives, and orders all your receipts in a single place. Functionality supported includes importing receipts from your gallery, as well as the transfer of invoices from your mail. The application automatically obtains line expenditures from any receipt through artificial intelligence and machine learning. This also works in doubled-sided receipts. By doing this you gather proof of expenditure, preserve it safely, and can later use it for every expenditure deduction that you qualify for. To top it all, this application syncs with a large percentage of tax-filling software.
3. Contribute to your retirement now – tax-free
Self-employed individuals can lower their taxable income by appropriating extra funds into a traditional retirement account since these contributions aren’t taxed till taking out the money on retirement. Small entrepreneurs below 50 years can put a maximum of $5,500 (per individual) into a Roth or traditional IRA whereas for those above 50 they can contribute $6,500 into their retirement kitty.
You can consult your financial advisor for the retirement contribution that fits your cash flow needs. Certainly, this is a tax strategy that has benefits now and in the future.
4. Deduct expenditures arising from your home office
Many small business operations are based and conducted in home offices. However, not many individuals know they’ll get a tax reduction if they declare these business-related costs. Some of the deductible costs include mortgage interest, insurance, amenities such as internet connection, and repairs.
You will have to determine what portion of your house is specifically purposed for your business operations (the tax software will help with the calculations). Both renters and homeowners can benefit from this deductible expense.
5. Deduct your motor vehicle expenditure
Again, as with the home, you have to calculate what portion of car time is directly linked to using your car in your small business. After deducing this, you can then use the ratio to determine the total car expenses that are deductible for tax.
In this section, two types of deductions can be utilized. One is the normal IRS’s mileage rate or your actual motor vehicle expenditures which include servicing, gas, and insurance. Determine which provides optimal tax benefits before filing to ensure you minimize your tax bill.
