In order for small business owners to get the upper-hand during tax season, it must begin on day one of the tax year. That means organizing your receipts and filing your expenses in an organized format that will be easy to recall when it comes time to start filing.
This attention to detail will pay off when you are rewarded with deductions and credits that allow you to save big when you file. With that said, here are the most overlooked tax saving strategies and opportunities.
1. Healthcare tax credit:
If your business has under ten full time employees making under $25k, you stand to gain the most from healthcare tax credits. Even if you don’t owe any taxes, you can have this credit count towards next year.
2. Proper bookkeeping:
Entering all of your business expenses into a spreadsheet makes it much easier to determine your tax savings by the end of the year and avoid any surprises when you go to file.
If you work with outside vendors, manufacturers, and other third party partners, keep track of those whom you do more than $600 worth of business in purchases with to have them fill out 1099 forms.
4. Raise benefits for credit:
Offer incentives of health, dental, eye, or daycare benefits in replace for wage increases to keep taxes low, but moral high.
5. Auto mileage:
A common crossroads in small business tax deduction is filing for auto expenses, rather than mileage deductions. When gas prices are higher, you want to go for the mileage deductions, but when they are as low as they are these days, you’ll stand more to gain from the auto expenses credit.
6. Donate whenever possible:
For small businesses who have limited shelf space or inventory that just won’t move, it is more beneficial in the long run to get rid of it by donating to charity for tax credit, rather than paying to have it sit somewhere.
A good rule of thumb to follow is to donate anything that adds up to $500 or under, if that same profit cannot be made before tax filings.
7. Hire from within:
This decision is a double-edged sword, because we all know that business and personal life is often hard to keep separate when you have family employees. The tax benefits could be huge if you employ your kids or partner, allowing you to share health benefits and get taxed at lower rates for minors.
8. Always use separate accounts:
You could pay for business expenses on your own credit card, but that just means you’ll have a harder time separating items and keeping track of your expenses when it comes time to file.
9. Startup perks:
First-time business owners are eligible for up to $5,000 in deductions because the costs of opening a business are categorized as capital expenses.
10. Utilize training:
Keeping your employees and staff trained is not only smart for competitive reasons, it also counts as an investment that can be deducted from your taxes. Document any training materials or programs you have paid for learning opportunities.