Guidelines To Help Reduce Your Tax Liability
- Always Check Your Payroll – This is one of the main areas where you are most likely to get into trouble with the authorities, even if the only employee happens to be you. Being the only employee means that you will have to make the expected tax payments quarterly. It is very difficult for a new business owner to precisely predict income beforehand. However, this is the law and you are still accountable for the estimated quarterly tax payments.
- Calculate Estimated Income, Medicare And Social Security Taxes: If Medicare and Social Security tax is not calculated correctly, you will have to deal with tax penalties and interest. If you are willing to spend the required time and energy, then reading up on the subject can help. It is advisable to get tax advice from an accountant in this area.
- Seek The Help Of An Expert, Particularly If You Have Employees: Taxes become more complex when employees are involved. This is because you are required to hold back taxes on behalf of each employee and report this to the IRS either on a quarterly or monthly basis. This is where a tax professional comes in. If there are several employees working for you, then a tax professional or a payroll tax service can help by doing the necessary filings on your behalf.
- Keep Track Of Your Travel Costs: If you own a vehicle that is used for both business as well as pleasure, it is advisable to buy a pencil and a notebook to keep track of the times when you use the car for business purposes. Record all business calls, business trips to either deliver or pick up material, client entertainment visits or any other use of the car for business purposes. This will allow you to accurately deduct all the operating costs involved in the business use of the car. In case you are audited, you’ll have the necessary backup. The IRS is well aware of the fact that hardly anyone keeps records. Keeping good records of travel expenses is one of the best and most important tax tips for small business entrepreneurs. It can result in a profit of thousands of dollars per year.
Planning Your Retirement
You should definitely take advantage of the tax savings available within a retirement plan. Retirement plans such as IRA’s and Simplified Employee plans can give you an incredible opportunity for tax savings. The advantages are dual in nature – it is possible for you to get an instant tax deduction after which the money will accumulate and the tax will be postponed until you withdraw it.
Tax tips are applicable in a different way to each small business owner’s situation and method of accounting. Carefully review and plan the best strategy with a professional tax accountant/advisor and make the most of tax planning for your small business.
