New tax laws can be implemented each year and it is crucial for businesses to prepare and file their taxes according to these laws. Changes on tax laws are usually unpredictable and can have significant impact on your tax return and deductions.
In case a new law causes higher taxes, saving up on business taxes can go far in ensuring that your operations remain normal, and here are some tips that could help.
Take advantage of accountable plans
Accountable plans allow business owners to reimburse their employees for expenses that are compliant with regulations of the US Internal Revenue Service (IRS). This means that when it is time to file taxes, your employees can deduct certain business-related expenses as long as these expenses are properly logged. By taking advantage of accountable plans, you can provide a great benefit to your workers and also lower the total tax costs for your business. Accountable plans are covered under Topic Number 514 for Employee Business Expenses.
Pay attention to your adjusted gross income
Your adjusted gross income (AGI) can have a direct impact on the credits and deductions for which your business is eligible. How you can calculate your AGI may vary depending on some specific tax laws. Generally, the higher your total income is, the higher the AGI will be, and the business taxes you are going to pay will be based on it.
There are different adjustments to income you can make to reduce your AGI. Some of these adjustments include contributions to retirement plans, student loan interest payments and alimony payments.
Take tax credits
By implementing tax credits, the federal government is encouraging individuals and businesses to do (or not do) certain things. The family leave tax credit, for example, allows small businesses to gain credit on the amounts they when providing family leave benefits to their employees. Some of the other ways your business can acquire tax credits are by “going green”, hiring employees, doing research, and providing health coverage for your employees.
Track your receipts
To maximize your business tax deductions, you need to be aware of the money you had spent throughout the year. It would be a lot easier for you to accurately log deductions and submit a precise tax return if you properly organize and track company receipts for all your expenses. In case your business is going to be audited, keeping track of your receipts would also allow you to provide receipts and proofs of your expenses to validate that costs have been reported properly.
Use taxation software
There are software applications available in the market which can automatically prepare and file your taxes while accounting for tax laws and rules. Using a taxation software would simplify business tax filing and minimize the likelihood of computation errors. It will also be easier for you to know and utilize the opportunities you have to lower your taxes.
These are merely suggestions on how to maximize tax savings for business owners, and should not be taken as alternatives for professional tax advice. Before you try any of these methods, it would be best to discuss them first with a trusted tax professional.