There are many ways that small business owners can save on their taxes if they take action before year - end. So why do most business owners leave tax planning until the new year when it is a little too late?
Old habits die hard they say! But doesn’t it just make sense for business owners to take the actions that would give them the best returns?
As a business owner, you work hard to earn your money, but it is not the amount of money you earn that counts - it is how much of that money you keep.
One of the easiest ways to lose money is by overpaying your taxes. In order to get the most deductions, without committing fraud, here are 5 easy tax saving habits to implement:
1. Get an estimate of your tax liability ahead of time
By getting an estimate of your tax liability, you can see where you stand financially, and take advantage of tax reduction strategies that work best for your situation. You will also know how much to budget for taxes each month or each quarter.
2. Ask your CPA for tax planning ideas to help reduce your tax liability
There is little a tax preparer can do to help you legally reduce your tax liability after the year closes. Most of the tax deduction strategies that will reduce your tax bill have a December 31st deadline. Without being proactive, you can end up with a huge tax bill or be audited by the IRS for undocumented tax deductions.
3. Know your deductions
Deductions are based on spending or use of resources. Not all deductions will make sense for your business based on your cash flow requirements. Spending cash to get an additional deduction will not always work in your favor.
4. Know the true cost of paying yourself
Self-employment tax is often a surprise. Most business owners are unaware of how self-employment taxes are calculated in the different business entities (LLC, S-Corp etc.). It is within your best interest to find out ahead of time how much of your pay you are free to spend and how much you will need to withhold for taxes.
5. Always include taxes in your business budget
This is one of the most overlooked costs of doing business. Your business budget should include self-employment taxes and income taxes on the money that you pay yourself. You will also need to pay taxes on the profits from your business.
It is your right to implement tax-planning strategies to reduce your tax liability – being proactive is the key.
For more tax saving tips to implement in your business, visit www.ronicabrownagency.com/blog
Also check out my blog post, Five Easy Ways to Reduce Your Tax Bill