There is no doubt that being a small business owner is an expensive job. While running a small business, every penny counts as most of the small business owner live on a razor-thin margin of budget.
But the deal of running a small business becomes more expensive when you start paying more than the required amount of tax. There is a large portion of businesses which pays extra tax. It may be due to their lack of knowledge, or mistakes in the tax filing and bookkeeping process.
But if you are a business owner then nobody will expect you to be a tax professional and therefore most of the business hires tax experts for filing taxes or have in-house employees who deal with taxes.
So, let’s look at the tips and trick which can save small businesses from the trouble-making tax season and tax filing.
Utilize the tax software
Everything in the world has been speeded up by various software solutions and tax preparation is no exception to it. You can easily file your taxes with the help of tax software like Drake, Lacerte, etc. These software solutions make your tax filing easy, accurate and in addition to this, it also consumes less time in comparison to the manual and traditional tax filing processes. You can also host such accounting software in the cloud if you want to make the most of it.
Review the finances on a regular basis
You should review your business finances at least once a month before the end of the year in order to know the potential opportunities for minimizing your budget. A regular review will help you to get rid of mistakes before they become a disaster for you, and it will also keep you updated about the latest financial status of your business; improving your business decisions and plans. So, don’t leave everything on the accounting department and take steps to make sure it’s all well.
Instead of Employees, use independent contractors
Most of the small businesses are not in the situation to hire employees as after hiring an employee, they will have to give payroll taxes and give other benefits. Therefore, going for the independent contractors is the best option as in this case, you don’t have to give the payroll taxes and any other benefits. But make sure to go through the difference between employee and independent contractor because if they will match, then you can get in trouble.
Always consider a retirement plan
Even if you are thinking that you are too young for the retirement plan, you should never ignore the tax benefits offered by it. Through the retirement plan, you, your employees and your business can easily get the benefits while paying the taxes. Some of the benefits offered by retirement plan in taxes are; employer contributions are tax deductible, able to attract better employees and assets in the plan grow tax free.
Have the right business structure
The business structure matters a lot for a firm while paying taxes. For example, the LLCs are considered as pass-through entities, which means that your business will be charged taxes on the ordinary rate while the C corp are taxed at the corporate rate. So, choose your business structure wisely as it affects your taxes.
If small business is able to save even a small amount of its tax then still it will be a great advantage for them as for startups, every penny matters.