As a business owner, you must know how various taxes will impact your business. You should be aware of all the technical aspects of taxation to ensure accuracy when filing your taxes and returns at the end of the year and compliance with state laws. It will also save you from getting into trouble with the IRS, which can be pretty expensive. Fortunately, there are a few nifty tricks you can employ to reduce your tax liability. Following these will help you run your business operations without the hassle and have a seamless audit at the end of the year. These tricks include:
Get a relevant degree
If you are passionate about the subject, why not get an education? Having a reliable and highly qualified tax consultant or accountant can ease off the burden on your shoulder. But as a business owner, you need to have a clear idea of your taxes rather than relying on someone else. Hence consider acquiring a relevant degree to know about tax laws and their different technical aspects. It will empower you to make the right tax business decisions.
You can leverage the internet to maintain a balance between your entrepreneurial and academic life. In that case, an llm taxation online will be the perfect fit for you. It will make you familiar with different tax regulations and prepare you for a year-end audit. Also, earning a degree in taxation can help small business owners save on hiring tax consultants who charge a hefty penny for their services.
Have separate personal and business accounts
This is a no-brainer! Having separate accounts for your business and personal expenses is crucial for streamlining your business taxes. Use the business bank account for business expenses, and no personal withdrawals or changes should be made through it. If you mix personal and business funds, shareholders can face business tax debts. Moreover, this will help you maintain accuracy in your business costs and prevent penalties from the authorities.
Keep track of your payroll
The IRS is very concerned about income tax and social security, so you must pay your dues on time. There are different scheduled payments and tax forms that apply to employees, so it is crucial to understand the technical aspects of payroll.
Every employee has to complete a W-4 for federal withholding. And the employer has to take care of the employee’s Medicare payments and social security. The money should be deposited monthly, quarterly, and on a weekly basis with the IRS. If you make incorrect and late deposits, you can face heavy penalties. You also have to clear the unemployment returns along with regular fillings and deposits.
Many first-time entrepreneurs have to go to an accountant to ensure that paperwork is acceptable and filled in according to government policies. You will learn the process in the first year after opening your separate accounts.
Avail startup deduction in taxes
The expenses you incur to start a business can also be utilized as a tax deduction. You have to take the allowable deduction while establishing your business. You can deduct around $5,000 for startup and research, and development costs. The research and development deductions are reviewed to analyze the viability of the business ideas and ordering supplies.
You have the right to claim the deterioration of business items with time. For example, you can claim the depreciation on your business laptops and a fleet of the company’s cars. Tangible things like machinery, furniture, and buildings are depreciable. Property like software, copyrights, and patents is tangible also. You can claim overtime depreciation of property for a bit of amount every year, or you can take it entirely in a single go.
Depreciate the total value of the property in the first year. But it depends on your business situation, and do it only if you expect a profit from your business in the first year. Otherwise, it will be a waste of your effort and time because there will be no tax deduction.
Save time to meet deadlines
You should have sufficient time to meet deadlines. It is recommended to submit the required documents and information to your accountant well before the deadlines so that you can prepare for the necessary paperwork. Filing your taxes early can save you from unnecessary late penalties
Regularly review your bookkeeping
You can hire a bookkeeper to examine and keep your books. It would be best to conduct a final review after your bookkeeper shares the business’s books. It will help you find out any errors for you to correct. By reducing errors, you will be able to keep costs down, and having accurate books impacts your business progress positively while filing taxes.
Tax planning is one of the most integral parts of running a business that you cannot afford to overlook. It can help you save thousands of dollars to invest that money wisely somewhere more important. You have to maintain a proper check and balance on your tax-related matters. From reviewing your bookkeeping to claiming depreciation at the right time, you have to keep various factors in mind. It will help you accomplish your business goals and to keep your operations on track.