7 Ways to Reduce Business Taxes
Finding ways to reduce business taxes is important as every penny you save matters. With the year comes to a close, it’s important to start planning for a smooth tax season in the first quarter of next year. The IRS tax filing deadline for 2016 taxes is April 17, 2017, and business taxes can get a little complicated! Work with a trusted tax professional who can explain everything to you. A good tax professional should help you understand exactly what your deduction options are and what you’re paying.
Year-Round Tax Planning
It is crucial to your business that you keep good records throughout the year. Tracking income/profit and business expenses/deductions require proper record keeping and accountability so that you can easily prove what your numbers are when tax time comes around again. Use a simple accounting software if your business is small, or the finances can be tracked by accountants, controllers, and/or a CFO on staff for larger businesses. Be sure to keep good records of business expenses and receipts. Receipts can include a log of vehicle mileage if you travel for business using your car, meals, and more.
The tax laws are always being updated and changed, so a CPA you fully trust is an excellent asset. You might also use a small business tax software if your return is pretty straightforward and you want to file without an accountant’s help. These tax return programs will contain information to help answer your tax-related questions as you complete your return.
Why Should You Reduce Your Taxable Income?
As a small business, you might get hit with a tall tax bill, which is complicated further if you have employees. Inadequate planning can leave you reeling if you don’t know your tax information and don’t properly record your expenses. Reducing your taxable income helps to alleviate some of the burden of your business taxes. Since you’re heading into the last months of the year, now is an excellent time to work on projections of your tax responsibility for 2016. Decide if you would benefit from reducing your taxable income.
How to Reduce Taxable Income
Reducing taxable income and taking advantage of deductions is a smart move for small businesses. An accountant can help your business decide the best way to take advantage of deductions. In the meantime, here are a few major ways to reduce your taxable income:
- Employee benefits: Contributing to fringe benefits instead of bonuses or salary increases can reduce your taxable income AND the taxable income of your employees. These benefits include retirement contributions, medical insurance, and group life insurance. Check out this article from BizFilings on tax deductible employee benefits for a comprehensive review.
- Expense reimbursements: By using an “accountable plan,” you will reimburse employees’ work expenses. If you don’t use the proper protocol and plan, you will have to include those reimbursements on the employee W-2 and you’ll both pay taxes on the amount. The above article from BizFilings discusses accountable plan details for more information.
- Philanthropic and charitable donations may be tax deductible, depending on the organization. Whether you make monetary or item donations, keep records and receipts of your contributions.
- Educational costs for seminars or conferences used to advance your business are deductible expenses. Personal development books and materials are included as reductions, too.
- Travel expenses: If you can wrap personal travel into a business trip, or work remotely on a vacation, you may be able to deduct your travel costs as a business expense. For example, if you fly for a trade show or conference but happen to go sightseeing, it doesn’t negate the business expense of your travel. Keep your receipts and claim a deduction for appropriate expenses (generally meals, conference admission charges, and travel costs). You can also deduct mileage if you drive your personal vehicle for work purposes.
- Home Office Deduction: If you have a home office used for work purposes, you can take advantage of the home office tax deduction and write off a portion of your rent or mortgage payment and utility bills.
- Company expenses: New equipment and office furniture are able to be fully deducted or depreciated over several years on your taxes. Check with your tax professional to determine what would be best for your particular needs.
How Furniture Can Reduce Business Taxes
As your company grows and your equipment and furniture succumbs to wear and tear of use, you may be in the market for new furniture, equipment, and supplies for your business. Consider the following furniture and equipment needs that your business may have.
Does anything need added, updated, or replaced in your business?
Around the end of the year, we hear from businesses that would like to reduce their taxable income by investing in quality office furniture and supplies. We’re proud to offer high quality furniture and accessories at discount prices so you can make the most of your expense budget.