How to Cut Your Business Income Tax like a Pro
Every business owner wants to minimize their taxes in order to maximize profits for the year. And there is nothing wrong with trying to cut your tax bill, as long as you don’t adopt illegal tax-evading practices. In business, a dollar saved is a dollar earned, so here are five tips that will help you maximize your tax savings.
Move incoming payments to the next year
Any business income you receive before or on December 31 is considered income in the current fiscal year, so if you’re keen to save on income tax, you could request your client to defer the payment to January. Remember to check with your accountant first if this would make a considerable difference in your tax bill.
Spend on inventory and equipment
Smart business owners don’t wait for end of year to take account of their income and taxes. They keep track of income and other taxes they have accrued on a monthly if not weekly basis, which helps them plan large expenses that will help reduce the current year’s tax bill.
From day-to-day supplies to new equipment to advance payments to vendors (if they’re willing to accept the same, as it will increase their taxable income for the year), there are several ways to cut your taxes if you have been proactive in the preceding months and know where you stand when December arrives.
Save big to save on taxes
Have a retirement savings plan? Planning to buy additional insurance? Year-end is a good time to deposit funds in savings plans in order to maximize your tax deductions. Another noble way to increase your tax savings is by making a contribution to a philanthropic cause.
If you’re not keen to contribute cash, you can donate essentials such as food, clothing, shoes and even pre-used equipment from your office and claim deductions for the same.
Take account of carry-forward deductions
Did you know that several types of deductions can be carried forward to the next fiscal year if they’re not completely utilized in a single year? For instance, a business that suffered a capital loss or made a large donation or incurred net operating loss can claim tax deduction for the same in the subsequent year. Consult an income tax professional to identify carryover deductions you may have forgotten over time.
Hire an experienced accounting professional
This is one area where you should not try to cut costs in order to save a few hundred dollars. If you’re not satisfied with the services of your accountant or are done with the hassle of DIY tax filing, outsource your taxation work to a reputable and reliable local accounting professional.
A seasoned accountant can suggest you legal and practical ways to maximize your tax savings without breaking the law or inviting penalties. To do it right the first time and avoid needless fines, Find Local Accountants who have the education, experience and expertise to offer you a hassle-free tax filing service.