Do you operate a small business? Maybe you are wondering how to save when it comes to paying your small business taxes. I’m sharing six tax tips for small businesses to save money on their taxes.
Saving money on taxes does not have to be overly complicated. There are several tax breaks available to small business entrepreneurs. And, being proactive will go a long way in helping you to manage your taxes appropriately.
7 Tax Tips for Small Business Owners
Keep Good Records
Be sure you keep accurate records of your profits, and losses. This way you won’t find yourself having to pay late fees and penalties because you didn’t report all your business financial information in a timely way.
Be sure to keep track of any mileage and travel expenses that is related to your business. You can also deduct any purchases you make that are used for the purposes of your business. Be sure to keep receipts and have them documented with the purpose of the purchase. Maintain and store such receipts for a minimum of 7 years in the event that you would be audited.
Turn Your Hobby into a Business
Do you have a hobby that could be turned into a moneymaking business? Selling a craft, home-cooking, or services might be a great way to add a second income to your family, and also offer you a way to utilize your home for a tax break.
If Possible Work from Home
Having a home based business means you can keep your overhead low. But, there are also tax benefits for running a business from your home. You can deduct a portion of your mortgage or rent if you have a dedicated work space or home office. There are rules regarding this deduction, so be sure to know how to accurately document your home office deduction before you file.
You most likely will be able to deduct a portion of your utilities, including internet services if you use the internet for your home-based business.
If your small business is a family based business you may be able to utilize an income split to save taxes. Instead of filing jointly, you and your spouse may benefit by filing separately if you both receive income from the business. If one person’s income is in a lower tax bracket an income split might be the way to go.
File On Time, and Early Whenever Possible
File all returns, payroll taxes, sales taxes, etc. on time. If you are late to make any payments you will likely end up having to pay, fees, penalties, and interest. So it’s to your benefit to file all your tax filings on time.
Develop a Business Mindset
If you earn money through your small business you need to have a business mindset. If you think of your business as a hobby, you’ll likely miss many opportunities for tax deduction. Without documentation for your business filings some of your expenses may not be recognized.
By thinking as your business as a business you’ll begin to look for ways to legally deduct expenses, keep better records, and in the long run, learn how to earn more profit for your small business.
If you are operating your business as a sole proprietor or with a business, consider converting your business to a small business incorporated entity. Your business will benefit from a lower tax rate available to small business owners. And, you will also limit your personal liability.
As a small business owner you can enjoy several tax benefits through your entrepreneur endeavors, while also providing an income for yourself and your family. Don’t be intimidated by the business aspect of small business ownership, rather recognize where you need assistance and hire out any area of business management or service that you may need help with. After all, paying someone else to help with your business is a deductible business expense.
At Cowdery Tax and Business Solutions we are available to assist you with business taxes and bookkeeping services all year long. Just give us a call or leave a message below.