Benjamin Franklin is often quoted as saying “Nothing is certain except death and taxes.” Indeed, taxes are a certainty for companies of every size. To succeed financially, small business savings can be achieved by using tax-saving strategies.
Why Small Business Savings Are Important
Money has been described as “the fuel that keeps a business running.” So, small business savings on expenses, including tax payments, puts more “fuel” in a business’s financial “tank.” The payment of taxes reduces the cash flow needed to pay day-to-day expenses, including wages, benefits, and utilities. It reduces profits that can be used for capital investments and expansion opportunities. It is reported that the average small business pays 19.8% of its annual gross income in taxes. Every dollar saved in tax payments provides an added dollar to deal with every business’s financial needs.
Tax Strategies for Small Business Savings
Smart small business owners know that solid tax planning contributes to business success. Smart tax planning enables small business owners to save money and pave the way to achieve long-term growth. Consider these tax strategies to achieve small business savings:
- It is important for every business owner to choose the right business structure because each type of business structure comes with different tax implications. A tax professional can help you determine what structure is best for you and what that structure means for your taxes.
- Ensure that your professional accountant maximizes all available tax deductions including home office deductions, internet and phone expenses, travel and entertainment, business vehicle expenses, education expenses, and professional fees. Further, it is critical to keep accurate records of all business expenses to make the most of business expense deductions.
- Your accountant can help you see if your business qualifies for any tax credits that will allow a subtraction of the credits from taxes owed. Possible tax credits include the Work Opportunity Tax Credit (WOTC), Small Employer Health Care Tax Credit, Disabled Access Credit, and clean energy credits.
- Based on your business results each year, you can decide to defer or accelerate income from the business to best manage tax outcomes.
- Set up or contribute to a retirement plan. Maximize tax-deferred contributions using the best options for your business.
- Benefits paid under qualified employee benefit programs are deductible expenses. Those include qualified health and accident plans, adoption assistance, dependent care assistance, educational assistance, and group-term life insurance coverage.
- Write off selected equipment or real estate purchases through depreciation deductions.
- If you have a bad debt from operating your business, you may be able to take a deduction on your tax return.
- The interest on loan or line of credit payments is tax-deductible.
- The IRS provides deductions for businesses that use contractors and gig workers for help.
- Use a Professional Accountant and Tax Advisor to Help Achieve Small Business Savings.
Seek Professional Accounting Assistance
Contact Irongate Financial Partners serves small businesses in coastal South Carolina. We provide bookkeeping, financial analysis, and outsourced accounting services. Some of our major client categories include construction companies, restaurants, HVAC and home services companies, and medical practitioners. Our aim is to empower growing small businesses with accounting and financial insights and services that otherwise might be out of reach.