Five Smart Steps You Can Start Taking Now

Author: Keith Huggett

Your business tax liability depends on your net profit, which means that the more expenses you can deduct, the lower your tax liability will be. If you want to avoid a big tax bill at the end of the year, there are some decisions you can make now that will help decrease your tax liability.

You can adopt some or all of these tax strategies to save more money:

• Set up a retirement plan: In addition to providing an additional benefit to your employees, contributing to a small-business retirement plan allows you to defer paying tax on those contributions until the money is withdrawn in the future. This will both lower your tax bill in the year you made the contribution and help you prepare financially for the future.

• Use smart accounting techniques: If you reimburse employees for expenses or mileage, make sure this amount is not included in payroll taxes. This will save both you and your employees on taxes throughout the year.

• Pay attention to year-end cash flow: Deferring invoices until later in December will allow you to collect payment in January. If you combine this with accelerated bill payment, you can reduce your total income for the year.

• Select the right business structure: Depending on the size of your business and the amount of income you generate, it might make sense to convert to a C corporation rather then a pass-through entity such as an LLC or an S corporation. The type of business entity you have defines the way you are taxed, so take a close look at the options. 

• Boost benefits, not raises: If you want to increase employee compensation, consider making a larger contribution to their benefits instead. They will still take home more money, but you will pay lower payroll taxes.

The Tax Office Inc. provides tax-planning services so you can maximize your business profits. We can help you set up a charitable trust, create smart retirement plans and develop other strategies for reducing your tax liability. Call us today or contact us here to learn more.