Are you looking to take your business tax strategy to the next level? Here are some basic – but powerful – tips to keep you on track for next tax season.
Leverage Your Business Expenses
One of the worst feelings, from a business operations standpoint, is learning about a new or applicable deduction after you’ve filed your business taxes.
Business expenses, in nearly every form, are a perfect opportunity to boost the effectiveness of your tax strategy. And it’s more than just keeping your receipts organized.
When you are thinking about your business taxes, you should also be thinking about your business expenses – the ones you have, the ones you need, and the ones you could take on to optimize your tax return and refund status.
From loan interest to home office expenses, insurance, and work-related meals, you’ve got a lot of expenses tied to your business. Start strategizing ways to make those expenses work for you. Instead of waiting for old equipment to break down or reacting to expensive, production-halting expenses, plan them out where you can.
Your company cars are always depreciating – create a good schedule for replacing them or servicing them that also maximizes your financial benefits come tax time.
Donate with Purpose
Some of the biggest tax deductions can come in the form of charitable donations. But creating a good tax strategy means not only taking into account how much your business can give, but also what organizations you’re giving to and how they could build helpful professional connections down the road.
Partnerships with charitable organizations are a great way to:
- connect to specific communities
- build rapport with philanthropic movements in your industry
- show your clients and customers that your business is an asset to the field you work within.
You can choose where to donate based on the charity’s proximity to your industry, your brand values, and the communities in which your businesses reside.
Choose Your Company’s Accounting Method Wisely
There are two main accounting methods: cash and accrual. And though it may seem like the difference between the two is like choosing between six of one or half a dozen of the other, it’s not quite that simple.
When you report income and expenses on an accrual basis, you are essentially waiting until your project is complete before you report your funds from the transaction. Reporting on a cash basis, however, means you are reporting the funds as soon as you receive them – this means you pay taxes on them in the same year you receive them.
Because the timeline is a bit different for each, the accounting method you choose can greatly affect your business’s ability to schedule tax payments.
Choosing your accounting method isn’t something you’ll do year after year – it’s best to figure out which method is most beneficial for your business early on, and then stick to it.
Create Your Own Insurance
Another way to mitigate risk and create tax-deductible insurance policies for your business is to create your own captive insurance company. If your business is in an industry that could be considered dangerous or you’re having difficulty finding coverage that isn’t outside the scope of business expenses your firm can afford, you can create an insurance company that insures your business.
Doing this lowers your insurance costs, allows for more specific coverages, and offers tax advantages.
It is important to note that smaller businesses likely won’t benefit from this tax strategy – if the overhead costs of creating the insurance company are going to be higher than the related tax benefits, it’s best to try our other tips in this article first.
If You Don’t Know, Ask
There is no such thing as a dumb question when it comes to tax strategy. If you’re unsure whether certain nontraditional business expenses are tax deductible, reach out to a trusted tax advisor or CPA.
The tax code is long, confusing, and constantly changing. Something that wasn’t considered tax-deductible last year might be this year. The worst mistake you can make as a business is assuming that you can do your taxes in the exact same way year over year.
The bottom line is this: you can get creative with your business expenses, operations, partnerships, and revenue to build a tax strategy that benefits your business, rather than working against it.
Use the Right Tools
Information returns are a big part of business tax filing, and it’s easy to underestimate the importance of having your forms organized and ready to use during tax time. Your tax strategy, no matter how you choose to work it, can’t be implemented well if you don’t have the forms you need by the IRS deadlines.
Another tax strategy to ensure you keep business expenses down is to use the right tools for organizing and processing your information returns.
eFile360 offers assistance with storage and the filling out of all 1099, 1098, W-2, and Affordable Care Act forms. You can manually enter your data or upload a spreadsheet with all your forms information, whichever you prefer.
Once you have your order completed, our team will process it for you, which may include printing and mailing, e-filing, TIN checking, and more.
Sign up for a free eFile360 account today and let eFile360 help guide you through your business tax strategies and information return reporting.