It is in every business’s interest to save as much money on tax as possible to make as much profit as possible. If not managed properly, business taxes can be a tough financial drain to deal with every quarter or financial year – in conjunction with other financial hardships, taxes can even play a part in bringing a successful company down to its knees.
It has been documented and seen time and time again that taxation has been one cause of business failure, particularly small businesses. Even where it doesn’t directly hurt businesses themselves, it can be argued that it stifles entrepreneurial spirit and risk-taking. Once again, this just further emphasises that it is important for businesses to find ways to save money on tax.
While many bigger corporations and international conglomerates will turn to business tax counsel and guidance from known firms like Goodwin, most business entities just want to know some more simple ways they can save themselves some capital. Below we’ll detail some of the most simple and common ways to save money on business taxes in the USA.
Making Use of Accountable IRS Plans
A lot of what makes for good manipulation of the amount your business pays on tax is putting your spending under the right category. One example of this is where you place reimbursements for employees who receive travel money, tools for a job, or even corporate entertainment.
By making use of an Accountable Plan from the IRS, you can place these payments under the heading of ‘deductible expenses’ rather than ‘employee income’. This saves you paying further taxes of these fees through taxes on employment.
Ensuring Annual Gross Income (AGI) is Correctly Calculated
Most taxes on businesses are calculated on the basis of gross income every financial year. With that in mind, having the correct amount noted down for this figure is critical in paying the correct tax amount.
Make sure you adjust your gross income to consider for any deductions or exemptions you should be applying, this could put you just under the threshold of paying a higher rate of tax on your income.
Utilising Tax Elections to Your Benefit
Tax elections are forms usually used to indicate to the IRS how certain tax circumstances should be considered. If you can identify areas where these indications can legitimately save you capital, it is most definitely worth doing so. There are many different types of tax election forms, from complex 83b memorandums you can procure from places like Founders Workbench, to from 3903 which lets you claim back for moving expenses. With a bit of research, you’ll soon find opportunities to save your business earnings from tax just by submitting the correct form.
Some examples of where you could be saving potentially thousands of dollars are on car travel expenses – basing these on mileage and cost per mile can result in savings. Another good example is the space you use up for your office or workplace – you can be charged per square foot instead which can also result in savings depending on where your business is based.
Take Advantage of Fringe Benefits
It’s well-known that the higher your salary, or the salary of your employees, the more tax will need to be paid on these earnings. By that logic, paying someone more money will lead to paying more in tax. One way you can pay and/or compensate your employees is with fringe benefits which don’t trigger further tax payments.
There are plenty of fringe benefits that most employees will welcome as an alternative to a raise. Some of these include courses and educational support, food provided for employees, insurance in the form of health or life insurance, and much more. Consider whether putting some of these benefits in place within your business will both save you tax money as well as whether your employees will be happy with their implementation.
Start Saving Money on Business Taxes Today
It is never too early or too late to start saving your business money on paying taxes. We’ve taken a look at some of the most common ways that companies all over America are reducing the amount that the taxman takes every financial year.
Make sure you get on the same level as your competition by handling your tax the right way. Saving more capital means that more resources are available for the growth of your business.
Take stock of where your company is now and what heights it may reach in the future and plan the best route for saving money on tax to suit your own business structure and day-to-day activities.