A small business is always on its toes regarding its survival due to high costs and threats from larger corporations.
Each year, 1 in 12 businesses close shop. This is why they try to keep their expenses as low as possible and operate on a lean budget. But, large end-of-year expenses, such as taxes, tend to leave the chances of survival of such small enterprises damp. In fact, around 50% of small businesses close down after 5 years.
As a small business owner, it’s important for you to know how you can manage your finances in a more tax-efficient way. Tax saving tips can differ from industry to industry or business to business as laws are different across the country. But here are four general tips that can be used to improve your business’s tax efficiency.
Retirement Accounts:
The best way to save up on paying high taxes in the present is by saving up for the future. Retirement plans are not taxed by the government, therefore, if you spend on a premium plan, you can show an increase for your expenses, but it would show a lower remaining profit. This would eventually lead to lower taxable income on the part of the business.
Home Office Deduction:
Now that around 58% of the workforce is working from home, it’s ideal for small businesses to take advantage of the home office tax breaks that are offered by most states. These tax breaks are not applied to businesses or individuals who work from a home-based office, which would make your small business more tax efficient.
Account all Expenses:
Small work-related expenses cannot be taxed when they’re recorded as an expense. This means your short rides for business-related tasks or business lunch expenses cannot be taxed individually. A smart small business owner can crunch the numbers and find out the amount that these small expenses make up by the end of the year. This way, that amount can be treated as an additional expense, leading to lower profits and lower taxes.
Invest in a Tax Software:
Tax software can be a great friend of a small business that is always looking for special tax breaks or government support. Tax software is aware of all such tax break programs and can help you find one to help your business become more tax-efficient and do timely tax preparations while doing everything by the book.
If you’re a small business owner who’s looking for a tax preparing service that can help your organization become more tax efficient, reach out to 3Alpha LLC. Our accounting and tax experts are here to help you with their years of experience in the field with small businesses.
Visit our website to learn more about our accounting, bookkeeping, and tax services.