For business owners, the bottom line is always important. When it comes to filing your taxes, you’d rather get money back or come out even than end up owing. Believe it or not, you have near total control of this outcome. All you have to do is learn the best ways to save on business taxes so you can behave accordingly. Here are a few essential tips to save when filing your 2018 taxes.
1. Choose the right corporate structure. LLCs, S corps, C corps – there are plenty of different corporate structures to consider when you own and operate a business. How can you choose the right one? Which will deliver the best business tax (and overall) savings? You need to take the time to understand the benefits of different corporate structures so you can choose the one that offers the best fit for your company, including the most favorable taxation.
2. Get organized. Saving money on taxes starts with tracking your cash flow. This means creating a system to detail money coming in and going out. It’s not enough to know how much you earn. If you want to save on taxes, you also need to pay attention to what you’re spending on your business. Many expenses are deductible, but not if you don’t have an organized tracking system for proof.
3. Save receipts. You might not think it’s important to track every business expense, from payments to vendors, to travel, to corporate lunches, to supplies like light bulbs. However, even tiny expenses can add up and you want to make sure you get credit for all deductions you’re due. This is made easier with an organized system for tracking expenses and filing away receipts, but you first have to make sure you save receipts for every expense. If you get audited, you won’t be sorry you have proof of purchase on hand.
4. Do not comingle finances. When you own and operate a business, the first rule is to separate business and personal expenses. This is for your protection in the event that business creditors try to come after your personal assets to repay business debts. However, it’s also wise for tax purposes.
When you have separate accounts and credit lines for your business, it’s easy to note all applicable deductions. You’ll save time over sifting through comingled business and personal expenses, and nothing will slip through the cracks.
5. Weigh the benefits of employees versus contractors. You may need different types of workers to keep your business up and running. While professional contractors may charge a bit more up front for their services, you could save money over employees, who will not only expect a salary and regular hours, but also benefits like insurance. You can also avoid the expense of payroll tax.
6. Consider the benefits of offering retirement plans. It’s true that setting up and managing retirement plans for employees will cost you money, but it will also help you to hire and retain better employees, and any contributions you make are tax deductible.
7. Use available resources. There’s no denying that business taxes are complicated, but you don’t have to go it alone. The IRS offers many resources for individuals and business owners to help them better understand applicable taxation, how to comply with rules and regulations to avoid penalty, and how to get the tax return you’re due. A good place to start is the IRS Video Portal for businesses.
8. Find a qualified accounting firm. This is essential. Unless you happen to be an experienced business accountant yourself, you’re going to need help to ensure that you’ve got all your ducks in a row. You not only want to comply with tax laws affecting your business, but you want to save as much money as possible when filing. A professional accountant with experience working with your type of business is ideal.
9. Listen to your accountant. Once you have a great accountant on your side, it’s best if you take his/her professional advice. You might have to do some extra work, but you’re the one who will benefit with savings and reduced risk in the long run.
10. File on time. When you’re running a business, it’s easy to get distracted by pressing concerns and drop the ball on filing your taxes. This is a major mistake since you’ll be charged interest on any money you owe when you file late.