As an owner of a small business, various questions will almost certainly cross your mind. How much am I supposed to pay for the tax? Why am I paying a specific amount of money? Is there a way I can reduce the taxable income? This is normal because the last thing you would want is to pay a significant amount of your hard-earned money to the government as taxes.
Here are strategies you can use to reduce taxable income:
Have A Retirement Plan
As a small business owner, you will benefit from starting and funding a retirement plan. This is an effective way of saving taxes for yourself as well as your employees. The plan must be qualified and recognized by the Internal Revenue Service (IRS). The IRS will allow you to defer payment of taxes on these earnings until you withdraw. It is always recommended that you work with a professional who will determine what works for you, considering your goals and specific needs.
Take Tax Credits
The federal government uses tax credits to encourage or discourage businesses from doing specific things depending on the greater good. Therefore, you can take a tax credit if you want to go green, provide employees with health coverage, offer access to your disabled employees, or hire new employees. Our accounting service employees in Atlanta and New Orleans are experienced and will, therefore, tell you what you qualify for looking at the provided terms. Luckily, most tax credits are under the General Business Credit, meaning that you will most likely qualify.
Write Off Bad Debts
The end of the year is your perfect time to review expenses and customer accounts before paying your taxes. Use this time to find out which accounts fall under the bad debts. Writing off bad debts allows you to reduce income and, therefore, save on taxes. Bad debts include customers, employees, and vendors who are unlikely to pay you back.
Deduct Travel Expenses
Small business owners can take advantage of this strategy to reduce business taxes if they travel a lot. Personal travel is not fully deductible, but business travel enjoys this benefit fully. The best thing to do is combine a justifiable business trip with personal travel and redeem flier miles earned from frequent business travels.
Use A Qualified Tax Advisor
Taxes can be overwhelming, especially for small businesses. Therefore, it is essential that you work closely with a qualified tax advisor for professional help before making critical decisions. Some experts will be available for a short period, while others will be available throughout the year. In such situations, choose the latter.
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