Paying and complying with tax obligations can be a major burden for small businesses. If you’re looking for ways to minimize your small business taxes, consider some of the tips in this article.
Worker Classification
Many businesses use independent contractors to stay flexible and keep overhead down. This can also reduce your tax burden because you aren’t required to pay a portion of your independent contractor’s Social Security and Medicare taxes.
Certain precautions should be taken when using independent contractors. If you exercise too much control and effectively treat your workers as employees, you could face a worker misclassification case. If this happens, you could end up owing back taxes, penalties and interest.
Choice of Entity
Choosing a business entity is another complex decision. You should also determine whether the changes made in the Tax Cuts and Jobs Act (TCJA) could impact your choice of entity.
The corporate tax rate was reduced in the TCJA, but another deduction was added for pass-through business entities. You may also prefer a certain type of entity for non-tax reasons.
Business Retirement Plans
If you want to save money on taxes and maximize your retirement savings, your business should have a retirement plan. Traditional IRAs have relatively low limits, but your business may be able to set up a SEP IRA, SIMPLE IRA, or another type of plan.
These plans can drastically increase the amount of tax-deferred money you can put in your retirement account each year. However, you may also need to provide these plans to certain employees if you want to take advantage of them.
Take Your Deductions
Unless you have a lot of tax knowledge, you should work with a tax professional when preparing your tax returns. Make sure you take advantage of the home office deduction, travel and meal deductions, and Section 179 depreciation, if applicable to your situation.
If you’ve made some tax planning mistakes, you might end up owing more than you can afford to pay or falling behind on your tax deposits. This can lead to tax penalties, interest, and even seizures of your business or personal property.
Contact a tax attorney if you need help getting out of tax debt or negotiating a deal with the IRS.
Get help with small business tax problems by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.