Small Business Tax-Saving Strategies

Since tax returns may influence a company’s ability to raise capital and business credibility, it is important that business owners are proactive in controlling their tax liabilities and their tax returns.  Taking the time to develop tax savings strategies that are congruent with your financing and operating strategies can result in tax savings, while also providing a consistent message to the marketplace. 

Developing a well defined tax savings strategy and finding tax savings is becoming more important as the prospect of tax rate hikes increase.  Due to the ballooning national debt and the impact of national health care costs, there is a consensus that taxes will increase in the near future.  There is even some discussion about increasing the FICA tax something that the government has not contemplated for decades.  As financial problems worsen, it will be small businesses that will be expected to fund the tax shortfalls.

Considering the negative outlook for the near future, it is time to fall back on some traditional tax savings strategies.  As always, reduce your taxable income in any way that you can.  Defer income into future years if possible. As tax rates increase, so does the value of charitable donations or any other deductions in taxable income. Other possibilities are to start a company health plan with a health savings account, or adopt a cafeteria benefits plan that allows you to tax-shelter more money.  Contribute as much as you can to your IRA or a company sponsored 401(k) plan.  If you have a sole proprietorship or pass through entities such as an LLC or S corp., in order to minimize your overall tax liability your tax savings strategies need to incorporate both your business and individual income.  Don’t let any expenses fall through the cracks.  In the current tax year, you need to be disciplined and efficient in tracking all your business-related expenses, since you will need as many deductions as you can find.

Other tactics that work for any tax year is to communicate with your tax professional.  Subscribe to IRS email newsletters so you will know in advance about new tax savings strategies.  Just in case your tax bill it greater than expected, it is always a good idea to economize and put money away to cover the potential tax liability.

In getting ready for tax filing, your goal should be to minimize the time, effort, and cost of preparing an appropriate and accurate return.  Since tax returns are used by investors, lenders, regulators, and tax authorities to better understand your business it is important to ensure that there are no glaring mistakes that can cause future problems or impact your ability to operate or raise capital.  Due to the impact that your returns can have on your business, it is recommended that business owners employ the services of tax consultant that can work with your accountant to determine an overall tax savings strategy for the business.