7 Ways to Save Money on Small Business Taxes

When you’re running a small business, cutting costs and saving money as much as possible should always be a top priority. When it comes to dealing with your taxes, being smart can actually lead to saving a considerable amount of money. Dealing effectively with your taxes could quickly become the difference between a steady, profitable business to one that’s barely scraping by.

It’s essential to be as smart as possible when it comes to dealing with your small business finances, and constantly seeking out new ways to save money is one of the best ways to do this. When it comes to your taxes, there are several things that you can do to make sure that you’re not spending any more than you need to. We’ve put together some of the best money-saving tax tips to try.

Tip #1. Use Reputable Tax Software:

If you want to save money by dealing with your small business taxes yourself, using a reputable tax software program can be one of the best ways to do this. Although it may be one of the more obvious ways to deal with your small business taxes effectively, you may be surprised at the number of company owners who do not utilize it to its full potential.

Using a good tax software program such as Quickbooks inventory can save small business owners a considerable amount of headaches and stress that come with filing your own tax return. Software programs all come with the added benefit of being accurate; although it’s impossible to completely eradicate errors, this can help you keep the risk of human error to a minimum. One of the biggest benefits of tax software is that it can save your small business a considerable amount of money, since it can often reduce the amount of assistance that you will need from an accountant.

Tip #2. Keep Track of Business Spending:

It’s crucial that you take the time to keep a careful track of how much money your business is spending. Whether it’s regular, necessary expenses or larger one-off purchases, tracking business expenditure will help you save money. If you’re not paying attention to business spending, you could potentially be losing out on thousands of dollars that you could claim back.

For example, keeping track of things such as how often you use your car for business purposes (such as meeting clients or attending networking events), you’ll be able to claim money back for your mileage and gas. In addition, keeping a close eye on how much money you spend means that you’ll quickly notice any overspending and be able to cut back sooner.

Tip #3. Track Your Receipts:

In addition to keeping an eye on how much your business is spending, you should also make sure that you’re tracking all of your small business receipts. The good news is that there are several ways that you can avoid having to keep hold of all the physical paper receipts, for example, by using a business credit card which keeps a record of purchases, or asking for electronic receipts wherever possible.

In addition, tracking your receipts will make it easier for you to keep on top of what you are spending and determine where you may be able to cut back. If you’re tracking your expenditure by keeping hold of all your physical receipts, then it’s very important that you keep them organized. You will likely incur further costs from your accountant if you hand them a box of unorganized receipts! In addition, keeping things organized will make it easier for yourself if you’re filing your own tax return using accounting software.

Tip #4. Know Which Office Expenses You Can Claim:

If you work from home as a small business, you may not be taking full advantage of all the different home office expenses that you are able to claim back. Taking the time to research and learn about what you may be entitled to claim can be tedious but it’s certainly worth it when it comes to the savings that you can make.

If you work from home as a self-employed business owner, look into whether or not you will be able to claim for a portion of your expenses such as heating and lighting your home, water use, internet and phone use, and even your mortgage or rent costs.

Tip #5. Pay for Your Retirement Now:

If you are self-employed, you may be able to reduce some of your taxable income by paying into a retirement fund now. Putting additional money towards a traditional retirement account means that the money will not be taxed until the funds are finally withdrawn when you retire. If you are under the age of 50 and a small business owner, you are able to contribute up to $5,500 into a traditional or Roth IRA; if you are over the age of fifty, you can contribute up to $6,500 towards your retirement savings.

Tip #6. Hire Relatives to Work for You:

If you have family members who are in need of a new job, hiring them to work for you can actually help you make some tax savings. Hiring a family member means that you will be able to make a business deduction for any reasonable compensation that you have paid to that person, which will lower your taxable income.

Tip #7. Take Advantage of Penalty Relief:

Despite following all these steps carefully, you may still incur an IRS penalty. In this situation, it’s important to find out whether or not you are eligible for penalty relief. Certain penalties, such as failing to file a tax return or being late with filing, are eligible for relief. You can be considered for penalty relief if you have attempted to follow the legal requirements but were not able to fulfil them due to circumstances that you could not control, such as illness or injury. Not everybody will qualify, but it’s always worth finding out if you do.

When it comes to taxes, there are several things that you can do to save your small business money.

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