Taxes are the less preferred topic for small business and beginners. However, ignoring it is impossible as it is most important. At the same time for a beginner, it is a must to consider or look for small business taxes saving strategies. It helps to manage your taxes and to avoid winding up in any sort of trouble.
Related Post: 5 Tax Tips For Your CBD Business
A few tax tips for small business
Initiate a retirement plan
One of the best tax saving tips is for any small business is to initiate a retirement plan. There are many options of retirement account that maximizes retirement savings and ensures to reap tax benefits. The retirement plans include IRA, SEP, or 403(b) plans. There are different retirement plans suitable for business owners as the strategy for tax savings.
Hire a family member
Reducing small business taxes is possible by hiring a family member. The IRS allows various options as it offers sheltering income as the potential benefit from taxes. Eliminating the tax is possible or paying a lower rate is an opportunity on hiring family members.
For instance, there is no need for the sole proprietors to pay Medicare taxes and social security on the child wages. The child must be a family member and it is a must to show the earning justifiable for the business. The IRS permits the small business owners to reduce taxes on hiring their spouse for work. It is because the spouse is not subjected to the FUTA tax. In this way, small businesses get to set aside some savings for retirement for themselves.
Consider adding employee benefits
Tax tips for small business includes adding employee benefits. It is a way of compensating the employees. You can do this by increasing their health insurance costs contribution. Thereby, avoid giving the same in the salary increase. The employer can give a monthly raise of $400 and it means to pay FICA tax, income tax, and Medicare tax from the wages. If so, the employer must pay the FICA, Medicare employer share, and also the state and federal unemployment taxes. Thus, the employer can go and inform the employees that instead of giving more $400, it will pay for medical insurance $400. Thus, it is a nice way of eliminating all the taxes and it saves money for both, the employee and the employer.
Deduct travel expenses
Reducing business taxes is the aim when the business involves traveling a lot. Business travel is deductible fully and personal travel does not offer the same benefit. You can maximize your business travel by combining personal travel. It will appear justifiable and meaningful. Moreover you get to earn frequent flier miles earning from the business travel and it allows redeeming later on your personal travel.
Alter Business Structure
As tax saving tips in a small business, there is no benefit for the employer on the portion of taxes he is paying. If the business is a LLC, the business faces tax and it is a must to pay the taxes. However, in certain circumstances it is possible to eliminate the tax responsibilities. It means you must consider a wise switch. It means pay a reasonable salary and associated risks. Thus, it is a good way of reducing the responsibility of tax.
Wise planning is certain to reduce for any small business a taxable income and it keeps the money working. Bear in mind to ensure you qualify by consulting a tax professional and consider potential savings.