Many small businesses do not seem to understand the importance of taking small steps all year long as one of the most vital keys to minimizing tax responsibilities and avoiding expensive tax penalties. As well, there are many eligibilities that small business owners are not even aware that they are entitled to, especially in light of the most recent tax reform laws.
The best place to keep up with any available information will be to follow the IRS Tax Reform News and Information Page.
If you run a small enterprise and would like to maximize your tax minimizations; we would like to help you succeed with some suggestions that will make a difference with your tax responsibilities by the end of the 2018 tax year. The more of this information you’re aware of, the more likely that these tips alone will increase your profitability in 2018.
- Begin by Educating Yourself About the Forms You Must Complete For Employee Payroll
Federal taxes will not be the only taxes upon which you will need to focus; There are also separate state and municipal, as well as additional federal forms that may be required.
- It is Best to E-File Your Taxes and File Taxes On Time
Filing on time will save you headaches and penalties. By E-Filing, you will receive a confirmation number that will be provided by the IRS, and there will be no question as to the date that your filing was received. Filing electronically on time will help avoid penalties that will accrue until you pay in full
- Paying Enough Quarterly Estimated Taxes Will Help Your Business Avoid Penalties
It is easy for new business owners to spend their W-2 income all the while believing that they can pay taxes on their entire income at the end of the tax year. The wise business owner will pay enough estimated taxes on a quarterly basis. It will benefit your business when you file your taxes next year.
- Consider a Reputable Tax Software Program and a Separate Accounting Software Program for Properly Tracking Expenses and Revenue Acquired in Your Small Business
Using a reputable tax software will assist in the avoidance of penalties. Doing so will also make a difference in helping you separate your personal from your business finances.
- Integrate a Paper Filing System
Set up a filing system of your choice, whether it is 12 folders in a filing cabinet, an expandable folder or an electronic receipt scanner and use it faithfully. Prepare a few hours monthly to organize all expense receipts, banking withdrawal, and deposit slips, etc. into their respective folders. Failing this, you will spend all of those stressful hours at the end of the year organizing all at one time. Monthly organizing will ensure that you do not lose your documents and they are correctly indexed and available at the end of the tax year.
- Consider Implementing the Services of Independent Contractors to Save on Taxes
Whether you are an old pro in business or you are just beginning, ICs will save small businesses money in many ways. For tax minimization, you do not have to pay taxes on their behalf. If you pay an IC $600.00 or more in a tax year, you will need to maintain records stating what you have paid them and merely provide a 1099 form at the end of the tax period. If you would like to do this, however, be sure that you understand the definition of an Independent Contractor according to the IRS.
- Consider the Donation of Remaining Inventory
Should you find that you must pay to store leftover inventory that you are confident will not be used, you might choose to donate that inventory to a good cause. This “philanthropy” will save money in the long run. The caveat is that donations exceeding $500.00 face far more strict reporting rules with the IRS sure gift makes sense.
- Consider the Benefits of Implementation of a Retirement Plan
See the “Highlights for Changes in 2018” located within this IRS Pension Limitations document.
- There Could Be Hidden Value In The Miles You Put On Your Vehicle
Not everyone is aware that they may have the ability to deduct miles they use to participate in charitable acts. You may also deduct miles accrued for medical purposes and even some personal uses of your vehicle. You can see what you are allowed to deduct through this IRS Standard Deduction page.
- Where and How You Decide to Structure Your Business Will Affect Your Tax Responsibilities
The SBA (Small Business Administration) offers a plethora of information as to how your specific business should be structured and how it will affect your tax status. This is definitely worth the read for a small business owner.