Don’t Miss Out on Tax Savings With These 4 Tips
For most businesses, filing taxes is a dull but necessary burden. However, with a quick shift of mindset, you will see that there are several tax breaks, relieves, deductions, and help that can be extremely beneficial for your business.
With the right tax-saving strategies, you can not only limit the amount of taxes your business is set to pay but also streamline the financial accounts of your company. All this while also avoiding unnecessary audits and keeping your business compliant. Here are the tips to consider in advance - or just a few weeks ahead of your tax returns.
Deduct Bad Debts
No business wishes to have not-paying clients - but this is bound to happen at some point! If you have noticed that there are some clients on your list who have not yet paid for the services provided, consider identifying the ones that are less likely to pay you back. You can then write off the amount that’s owed to you as a “bad debt.” By doing so, that amount will not appear as an income and, thus, can be deducted.
Time Your Income or Expenses
Depending on your business payment structure, you might implement this trick just before filing your tax return - but thinking about timing your income and expenses is more efficient when done in advance. All that this tax-saving tip involves is moving some of your income or expenses to another tax year, depending on in which year you are expecting to pay more taxes. You can do so by prepaying for stock and machinery, stocking up on supplies, or working with specialists on tactics like cost segregation to help with real estate investments.
Learn More About Qualified Business Income
The Qualified Business Income (QBI) dedication is a relatively new entry that came into effect in 2018 with the new Tax Cuts and Jobs Act (TCJA). Thanks to this deduction, you can now deduct up to 20% of your business through the income received to the company’s stakeholders, including employees, partners, and shareholders.
To do so, your business needs to be a partnership, S corporation, or sole proprietorship. Since the QBI has some restrictions to keep into consideration, you should consider consulting your tax advisor before taking advantage of this scheme.
Consider Implementing a Retirement Plan
You can save money on tax by providing yourself and your employees with a retirement plan. Retirement plans that are fully recognized by the IRS can help you defer earning taxes until these earnings are withdrawn. The suitable plans to get the best tax savings include 401k schemes.
By implementing these plans, you won’t only help your employees save for the future, but your business can also benefit from tax credits and deductions for every person in the plan and the business itself.
Consult a Tax Advisor
When it comes down to saving money on taxes, it is essential to find a professional advisor who can help you navigate the jargon and make the most of your tax returns.
Finding ways to save money on taxes by yourself can result in significant mistakes, which can lead to audits, fines, and penalties - which are going to significantly increase over the next years! With so much at stake, you should let your financial team or an outsourced professional find extra tax-saving tricks for your business.
