As a small business owner of two companies myself, I can say that owning a small business is no easy task. Taxes are sometimes said to be the worst part of the process. However, it doesn’t have to be. I’m here as a professional accountant to let you know some not-so-secret tax tips that you can utilize as a small business owner. Even before tax season rolls around, consider these tips as you go about your year, so you can get ahead for next tax season.
Benefits vs. Raises
Although not all, some employee benefits are considered non-taxable by the IRS, so you may want to incorporate some of these in your payroll strategy. Considering benefits and raises is a tricky thing, but your employees will thank you when fewer taxes are taken out of their paychecks. Some benefits that don’t incur taxes by the IRS are:
- Company cell phone
- Up to $50,000 in life insurance coverage
- Some meals
- And occasionally tickets to sporting or music events.
Keep in mind that gift cards are considered taxable income, so a small present like a fruit basket might be worth choosing over an easy-to-get gift card. Other benefits that are considered too minor to merit consideration carry no tax burden. Be sure to speak with a tax professional like those at BaCo Group about how additional benefits can count as expenses without triggering payroll or income tax liability.
However, don’t get hung up on using benefits over monetary compensation. Benefits should be useful and beneficial to your employees. If they’re not, you might be wasting resources and making your employees unhappy.
If you own a sole proprietorship or a partnership where two parents are the owners, you can reduce your tax liability when you employ your children. Your children should be old enough to contribute to the business. You would hire them as legitimate employees including W-2s and state taxes. Then, money is being kept in the family, and you, as parents, don’t have to give up money for FICA or FUTA. However, federal and state taxes still apply.
Consider Keeping Receipts
Collecting receipts can be a pain, but it can benefit you later should you be audited. See, you’re not required to provide proof for every business purchase according to the IRS’s expensing rules, but it will protect you in an audit. Plus, it will keep you from missing an expense when tax season rolls around and you’re trying to remember what you bought for your business.
The good news is, with technology, you don’t have to keep every paper receipt that you get. One solution to this is purchasing a scanner where you can digitally record and file your expenses and then toss the paper receipts out. There are also plenty of applications that make tracking receipts easier and most plug into your accounting solutions like Quickbooks, Sage, and Xero. By filing and naming the receipts in an organized manner, evaluating your business purchases later will be more efficient as well.
Get Mid-Year Estimates
Just because you work with a tax professional or CPA, doesn’t mean you can’t use tax software too! As you go about the year, you can utilize free tax software to estimate your taxes. This will help you make big decisions before you file your return such as purchasing equipment or stashing more money in your retirement account.
Additionally, consult your accountant about what you could deduct from your taxes as well or what opportunities you have throughout the year. This is why it’s important to tax plan and work with a CPA year-round, so you can make smart tax decisions that will benefit you during tax season.
How Can BaCo Group Help You?
The BaCo Group is a fully equipped accounting firm that is prepared to help you plan for your taxes year-round. We are able to do that because of our unique technology that allows us to work on your taxes in real-time. We can provide you with tax estimates and tax advice all year, so you are not stressed about your return and you can have the lowest possible taxable income. If you’re ready to see how these tips and the services we offer can improve your tax strategy as a small business owner, contact BaCo Group today! Our professionals would be happy to help you with your small business tax needs.
Published on Nov 02 @ 9:16 AM CDT