Tax season in the US is particularly that time of the year when all small and big business owners alike have to file for taxes on the revenue that they have generated throughout the year. However, when it comes to small businesses, if the owners play their cards right, they have an excellent opportunity to save a lot of money that would otherwise become taxable under the law. Here are 5 little known secrets that can help you as a small business owner in reducing tax burden on your business.
Let Your Family Members Work
It is amazing how the government has a favorable outlook for those small businesses in which family members work especially in terms of wages. If a spouse or parent is working for you, you are exempted from paying federal unemployment taxes. If your children work for your business, it is possible that you may not have to restrain income taxes and social securities. However, it is important for all small business owners to follow child labor laws when hiring children and reasonable wages must be paid.
Hiring Independent Contractors
Another great way to save up on taxes is to hire independent contractors. Now you might wonder what benefit you can get from hiring independent contractors to work for you. Well, first of all, you will not have to withhold income taxes, both federal and state, from their incomes. Second, you will be free from the burden of paying the employer’s share of social security and medical care taxes.
When hiring independent contractors, the owner must make sure that the IRS does not include the independent contractor as an employee otherwise you are headed down a bad road full of tax payments and fines. It is in your best interests that you contact a tax professional before classifying an individual as an independent contractor.
Maximizing Deductions to Cut Down On Taxes
Deductions can be maximized by following two ways. In order to qualify for a deduction, you must have excellent records and receipts collection by seeking professional advice from a tax professional. The second way is to write off office expenses, start up costs, insurance, furniture, education, travel, conferences and memberships. These two methods can greatly reduce the tax burden by maximizing deductions efficiently.
Payment of Bills Before the Year Ends
You can greatly reduce the tax burden in the month of April if you pay all your business related bills such as rent, electricity and phone bills before the start of January. This is a sure shot way to reduce tax burden on small businesses.
The IRS gives tax incentives to all those business that give donations to charity each year. If you have replaced your old computer system with a new one, give the old computer system away to a nonprofit organization to decrease the tax burden. In order to take advantage of the tax incentives offered by the IRS, make sure the donation you make has a value of $250 or above and remember to collect a written acknowledgement from the organization you have donated to.