Dreading tax time? Join the club.
We know – it can be a scary time for an entrepreneur like yourself. But we’re here to tell you that you shouldn’t be afraid.
Small business owners have so many tax-saving options available to them, and below we’ve listed the top three that all should have in their back pocket.
Deduct, deduct, DEDUCT!
This is one area where some small businesses are leaving a lot of money on the table during tax season. Do sufficient research to know what you can (and cannot) deduct. It’s so worth it in the end.
One missed deduction can literally be the difference between you saving hundreds, or even thousands, of dollars.
Okay, so what is deductible?
According to the IRS, a business deduction has to be classified as ordinary and necessary. Examples of ordinary and necessary (which also depends on what industry you’re in) include cell phones, vehicles, and meals purchased for sales leads or business meetings.
Electing to be taxed as an s-corp, which you can do even as an LLC, is another way to save money during tax time.
Being taxed as an S-Corp means you won’t have to pay federal corporate income taxes. This, in turn, means that your credits, losses, income, and deductions are passed to the shareholders, resulting in big savings for you.
Classifying your staff
Do you have employees working for you? If so, do you classify them as employees or contractors? If you’re looking for the cheapest route from a taxation perspective, look into hiring contractors.
Employers pay a lot of taxes for employees, whereas independent contractors pay their own taxes. To make the move from having employees to hiring independent contractors, you must make sure you’re basing their roles around the IRS’s definitions of the two.