A business set-up requires proper planning and execution of the same. You already struggle enough to make a whole amount of profit from your newly started business. Then comes the tax filing part that requires you to pay a considerable amount of money from the hard-earned profit that you made out of your business. You can consider hiring a business advisor to help in your small business. They will help to grow your small business with the help of efficient business strategies. However, there are fair chances that your business may face a serious financial crisis without proactive tax planning. Thankfully, there are legitimate ways to cut down the tax rates that can help you save more for your business and other utilities.
- Employ a family member
You can reduce a considerable amount of taxes by hiring a family member to manage your business. The internal revenue system provides various options that can help you in sheltering your income from tax deductions. You can also hire your children.
On hiring any family member, business owners would be eligible to pay tax at a marginal rate. The tax would be eliminated in the form of income that is paid to the family member in exchange for their contribution to the business.
For example, sole proprietors are exempted from paying medical and security taxes on their wages. You need to have adequate proof that your income is coming from a justified business niche. By hiring your spouse also, you will get the benefit of tax reduction. you would also be exempted from paying the FAUTA tax.
- Auto expenses involving your business
Keep track of your travel expenses that are spent due to business purposes. That can cover more than your fare for an airline ticket, even your food expenses during the trip can be counted along with your travel expense. You can also consider splitting the bill of your vehicle expense between your personal and business purpose. From there you will get to know the portion spent on business work. In addition to these travel expenses, the cost of your accommodation, and lodgings are also deductible. These expenses will have your back if IRS decides to verify for further process. However, nothing is deductible or can help in tax reduction if you are planning a trip in disguise for business purposes. These little expenses can help to a great extent to reduce the burden of tax payments.
- Consider hiring a reputable CPA
There are many intricacies and laws related to tax payment that you may not be aware of or may slip your mind at the last moment. Hence to avoid making these faults, you can consider hiring a certified public accountant. They help you to do your taxes in the right way irrespective of your financial situation. There are several best small business tax accountants in Melbourne who can additionally help you in tax calculations. They will help you with ways to pay the due amount. They are well aware of write-ups and other legal procedures that can help to reduce tax amounts. Hiring them may cost you a little, but they can help you to save money that would have been spent on tax payments otherwise.
- Implement health saving plan for employees
An innovative way to reduce your tax burden is to save money for healthcare needs in future. Even if you are healthy today, you cannot be sure about tomorrow, medical facilities are getting expensive with time, and you need to be prepared for it. The effective way to do this is to create a health savings plan for your employees. With the implementation of a health saving plan businesses will be able to save on medical bills as well as tax payments. Both contribution and growth are tax-free. Even when you want to make a withdrawal for medical expenses, that would also be tax-free.
- Deduct assets to charity
Another innovative way to reduce tax amounts is to donate and deduct assets to charity. If you opt to donate consistently to the charity, it can benefit your business in multiple ways. Other than helping in tax reduction, it will enhance your brand’s value in addition to highlighting your loyalty to the community. You just need to choose a charity that perfectly resonates with your community and brand, then spread more information about it in your surrounding as well to your customers. It will further increase the number of loyal customers benefitting from your business.
- Keep track of business losses
Keeping proper track of regular business losses can help in your tax deduction. The amount of loss you experienced in your business would be deducted from your income. In many cases, this has proven beneficial in lowering the overall taxable income of the business by thousands of dollars. This can help business owners further by saving up on personal expenses such as charitable donations or home mortgage interest.
By following the above-discussed points along with wise planning you will be able to make an effective reduction in tax payments. Also, there are start-up deductions available that you can utilize for further tax deduction purposes. To implement the legal measures and other advantages of tax deduction, consult with an experienced tax professional to avoid any unwanted issues. They will help you to make potential savings from your business and qualify you further to enjoy the advantage of tax deductions.
Also, read – 5 tips to help grow your small business