A Quick Glance At How Entrepreneurs Can Save On Taxes
Successful entrepreneurs almost always find ways to save money and maximize their returns. Filing and
paying your taxes on time is crucial as late filings and payments will always increase your tax bill due to
penalties and interest. The best things to do is find a tax professional who specializes in your business’
industry. An efficient tax expert will be able to provide advice that goes beyond preparing the regular
tax returns and financial statements.
What one usually misses out on
Some commonly missed tax breaks include the Domestic Production Activities Deduction, the Small
Business Healthcare Tax Credit and the Worker Opportunity Tax Credit. A few of the other lesser-known
tax breaks include the disabled access credit and a tax credit for setting up and administering a small
business retirement plan. Some tax breaks may exist based simply on where your business is located,
because there are many states that have tax deductions and credits for qualifying taxpayers.
Importance of Year-Round Tax Planning
The number one tax saving tip is year-round tax planning. Efficient tax planning can mean the
difference between paying $50,000 in taxes for 2012 or saving $50,000 in taxes. While it is highly
essential to track all expenses, self-employed businessman has to spend time reviewing all of their
expenses since they pay federal, state taxes, social security and Medicare.
● Some deductions entrepreneurs may be able to include are business expenses, such as office
supplies, business dues, business publications, accounting fees for your business, business
cards, business entertainment (50% deductible), gifts (limited to $25 a person a year), postage,
printing, continuing education, computers and software. These are all business expenses and
with good accounting, one would not miss any of these potential deductions.
● Any recently started business should be aware that the treatment of certain initial expenses
for tax purposes could make a big difference in your tax bill. Taxpayers are permitted to elect to
write off $5,000 of startup expenses in the year business begins, and the rest can be deducted
over a period of 180 months that begins with the month business starts.
● It could be a good idea to install a medical reimbursement plan to cover co-pays, and
deductibles. The business gets to deduct these costs in full and the owner/employee does not
have to report the payments as income.
● The business gets a tax deduction for salary, if their children are hired and the children may not
have to pay any tax on the income.
● Another tip is to hold board meetings at vacation destinations. As long as 51% of the trip is
business, the travel cost is deductible.
As every situation is different and tax law is not “one size fits all,” these are just a few examples of how
an entrepreneur can reduce their taxes. Partner with a reputed tax expert who can provide assistance in
other areas like foreign bank account, overseas voluntary disclosure, etc.
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