Preparing and submitting taxes for businesses can be complex, especially due to the changing laws. Business owners must understand the latest tax code when preparing their taxes.
With proper tax planning, you can drastically reduce your taxable income as a business owner and help keep more money in your pockets. We’ve compiled a list of five tax-planning strategies to help you during tax season.
Hire a CPA Firm
Hiring a CPA firm such as MI Tax CPA offers many benefits for businesses. Inaccurate tax filings can result in tax audits, penalties, and high tax payments. That’s why you must hire a CPA firm that knows tax regulations and can help you submit accurate information.
Tax professionals can help your business change its operations to increase tax reductions. These are reductions that many business owners aren’t aware of and can lower the tax burden. Not to mention, CPA firms are available year-round and can ensure you have accurate recordkeeping, which in turn allows you to claim more tax deductions.
Claim Any Education Programs
If you’ve attended training sessions, classes, or seminars related to your business, you could overlook important deductions.
You can claim courses related to your industry and an update or development to a current skill you already have.
Write Off Bad Debts
The IRS lets businesses minimize their income tax through bad debt reduction. Business bad debts typically come from the following:
- Credit sales to customers
- Business loan guarantees
- Loans to employers, suppliers, clients, and distributors
Business bad debts result from a business transaction or a direct trade. Having bad debt written off is important when the invoice is uncollectible.
Make a Charitable Donation
Businesses that make charitable donations to nonprofits can qualify for tax deductions. The easiest way to benefit from these reductions is through recurring and event-based donations.
Recurring donations are when you donate a set amount each year. Most nonprofits allow you to set up automated payments online, giving you digital receipts that can be used for tax purposes. Event-based donations are one-time donations that must be kept and recorded.
You must contribute to a nonprofit organization that satisfies the tax-exempt status criteria in section 501c3.
Deduct Travel Expenses
If you or employees of your business travel a lot, you might be able to reduce your business taxes. While personal travel can’t be deducted, business travel is fully deductible. Business owners can combine personal travel with justifiable business purposes to maximize their deductions.
All frequent flier miles earned through business travel can be later redeemed for personal travel, letting you get the best of both worlds.
Wrapping It Up
Taxes planning is a crucial component of running a business. On average, small businesses pay a tax rate of 19.8%.
Learning how to reduce your tax liability puts more money in your pocket, giving you the cash flow needed to invest in other areas of the business for future growth.
Managing your business taxes doesn’t have to be a headache. Follow the steps in this post to make tax preparation a little easier.