As tax time approaches, many small business owners are looking to maximize their deductions. To help you avoid overpaying on your taxes this year, 4Corner Business Services’ tax experts put together a list of 6 of the most common ways small businesses can save money on taxes.
Keep in mind that because no two businesses are the same, some tips on this list may not be appropriate for your company.
When The Tax Cuts and Jobs Act (TCJA) went into effect in 2018, it allowed some businesses to deduct 20% from qualifying business income. The rules of this deduction depend on the structure of your business, your taxable income, and whether you’re married or filing a joint return, so be sure to talk to a tax specialist to determine your eligibility.
The government provides tax credits when businesses do things (or don’t do things) that benefit the greater good. For example, when you commit to going green, hire employees, provide access to disabled employees, or provide health care coverage, you can claim tax credits.
Creating and funding a retirement plan for you and/or your employees can help small businesses save on taxes. Your retirement plan must be recognized by the IRS to take advantage of tax savings. Popular IRS-qualified plans include 401(k) or 403(b), but with the number of retirement options available, it’s a good idea to double-check with a financial professional to find one that works best with your company’s goals.
Your business’ structure plays an essential role in your taxes. Not only does the structure dictate your taxable responsibility (such as the percentage you’ll pay into Social Security or Medicare taxes), but it also determines your ability to deduct business-related expenses. Make sure your business structure is serving you and your employees by meeting with a tax planner.
The IRS allows you to apply an unused portion of a tax deduction to a future years’ tax return. Small businesses typically use carryovers when there’s an expense that exceeds the yearly limit for a tax deduction. Carryovers are highly dependent on the tax credit or deduction in question and your business’ activity in the previous year, so be sure to check with an accountant before counting on a carryover.
In addition to using a tax preparation expert, invest in a tax planner. 4Corner’s tax planners become an extension of your team and provide insight and contribute to your tax-saving strategy all year long. This can help you shape your business for financial success – before, during, and after tax season.
Read More: Biden Tax Changes And The Impact On Your Taxes
Every business is unique, and some items on this list may not benefit your small business. At 4Corner, our tax planning and preparation teams dive into your business’ current financial status and future goals to offer highly individualized guidance. To learn more about how 4Corner can help your business succeed, contact us today to set up a free consultation.