When you open the doors to unveil a new small business, the startup and recurring expenses you’ll incur can take a huge bite out of your budget. Oftentimes, these large costs can prevent entrepreneurs from trying their hand at small business ownership entirely.
But amid the mounting costs and stresses, owning your own business can be an incredibly rewarding endeavor, and the costs don’t have to completely deplete your resources. In fact, there are a few strategies that can help you reduce your IRS business tax bill and hold on to more of your hard-earned income. So before you dive in, take a moment to read these 4 simple tips to reduce your taxes this season:
Adopt a Formal Business Entity StructureIf you are a sole proprietor or work in a business partnership, there is a good chance the IRS is taxing you at one of the highest rates on the books. The good thing is that there are some options to help reduce what you owe Uncle Sam each year.
One way to avoid this is to adopt a formal business entity structure for your endeavor. Going the formal route can immediately offer increased flexibility for your business, highly-desired limited liability protection and a reduction in taxes. You may choose to register an S corporation, C corporation or a limited liability company (LLC). With an LLC, you can choose to be taxed as either an S corp or C corp via the entity classification election.
Explore All IRS Business Tax DeductionsThe IRS allows business owners to write off a good number of expenses that are directly tied to their operations. So, it’s critical to explore all potential business deductions that you could claim to reduce your income tax bill.
Consider claiming your home office, vehicle, meals and entertainment and startup cost deductions. Many newly-crowned small business owners are stunned at what they can write off and how much money they can save through these valuable items if they’ve never been claimed before.
Explore All IRS Business Tax CreditsEven though tax credits are not as prevalent as tax deductions for business owners, they are still worth researching. Business owners who hire military veterans or disabled individuals, utilize energy-efficient equipment for production purposes or are involved in certain industries are typically eligible to claim tax credits that can substantially reduce their IRS business taxes. Some credits can only be claimed once, while others can be claimed multiple times. Be sure to research the ins-and-outs of each business tax credit.
Outsource Your Business Tax Requirements to an AccountantBusiness owners in all fields tend to wear a variety of hats representing their wide array of duties. But one hat that doesn’t always fit well involves handling the tax and accounting requirements of managing a formal, profit-generating business. Because of this, outsourcing your business tax filings, bookkeeping duties and payroll responsibilities can save you significant time and money.
Corporate accountants know the tricks of the trade to assist their clients in reducing what they owe Uncle Sam each year. Since these tax-reducing strategies are 100% legitimate, it only makes sense to have a knowledgeable accountant in your back pocket who can take care of your business tax responsibilities for you. An accountant’s services are well worth the peace of mind and extra time you’ll get to focus on your top priority – making money.
Although tax season represents an extra demand of time, money and resources, it doesn’t have to be a dreaded or complicated task. By following these tips and doing your research, you can get the most out of your taxes this year and keep your hard earned income!
Have any questions? Ask them in the comments below!
About the author
Brendon Pack is Vice President at 1-800Accountant, the nation's leading tax and accounting firm for small business owners and entrepreneurs. Brendon has assisted thousands of clients over the years to ensure they fulfill all of their tax requirements while keeping more of their hard-earned money.