Making sure you are tax compliant as a new small business owner can be complex. Navigating state, federal, and local tax requirements can be complicated and confusing for new business owners. There is no getting away from paying your taxes, but making sure you are paying what you owe and knowing what deductibles are allowed to reduce your tax bill legally will help you avoid paying any more tax than you need to.
For many small business owners, the cost of employing a company to guide them through their taxes such as https://creativetax.io/ is worth the investment to help them keep on top of their taxes and resolve any tax-related issues you may be having with regards to paying what you owe, avoiding action on unpaid taxes and more.
Keep in mind these following tax advice tips to help you reduce your taxes and avoid paying any more than you need to.
It is always worth looking to your local state for tax break incentives. These can come in the form of energy tax breaks. If you install energy-saving appliances or have energy-efficient premises, you can be entitled to a tax credit or incentives.
Other options include disaster relief charitable donations or regular donations. However, it is advisable to check locally what your state allows to benefit from this.
Do you have a 401K? If not, now could be the perfect time to start that retirement plan you have meant to set up. Check out the IRS website to see what tax relief strategy you can benefit from when it comes to your retirement fund. For example, on a one-person 401K savings plan, the IRS will allow you to put away up to $57,000 in total contributions to your retirement.
Health Savings Account
With the cost of medical care rising, many tax experts advise their new business owners to consider setting up an HSA (health savings account) if they have an eligible high deductible health plan.
Not only can the business and employees reduce their tax via this savings account, but also because your contributions are counted as pre-tax, the savings can grow tax-free, and any withdrawals you make will also be tax-free too.
All business travel expenses are deductible. While you can reasonably combine a personal travel trip with a business purpose, personal travel isn’t included in this tax benefit. However, if you have a loyalty scheme such as frequent flier miles, the miles you add up for business travel can then be used on personal travel, saving you money that way.
Being careful with keeping your records as a small business owner will help you maximize the tax relief you are entitled to. Reduce your tax bill by being aware of what you are entitled to deduct legally and maximize your profits. In all cases, it is advisable to consult a tax professional to make sure you are legally allowed to claim any deductibles to avoid being landed with a hefty tax bill after an audit and further action by the IRS.