Every year, as seasons change and the end of the fiscal year draws closer, small business owners like you face the daunting task of handling taxes. Whether it’s navigating the numerous tax codes, seeking opportunities to minimize tax liability, or simply trying to stay in compliance, tax planning is a crucial part of running a successful enterprise.
But fear not, here are some of the best tax strategies specially tailored for small businesses.
Understanding Your Tax Obligations
Paying taxes is a necessary and vital responsibility of every small business owner. It’s not just the law, it’s also a way of participating in and contributing to society. But that doesn’t mean you have to pay more tax than necessary. Understanding your tax obligations and being aware of all the benefits and deductions your business is eligible for can significantly minimize your tax burden. This is where a trusted tax advisor or CPA can be extra valuable.
Taking Advantage of Tax Deductions
One of the most effective strategies to reduce your tax bill is by taking advantage of all the tax deductions available to your business. Here are a few examples:
- Business expenses:
- This includes everything from office rent and utility bills to staff wages and business equipment.
- Home office:
- If you use part of your home exclusively for your business, you can deduct a portion of your home-related expenses, like mortgage interest, property taxes, and utilities.
- Vehicle expenses:
- If you use your car for business, you can deduct its operating and maintenance costs.
Make sure to document all business-related expenses! Whether you prefer keeping paper receipts, or using a financial tracking app, it will for sure pay off.
Managing Your Tax Payments
Another crucial aspect of tax planning is managing your tax payments. Many small businesses fall into difficulty when they don’t prepare for their tax bills. Here’s how you can manage your payments effectively:
- Set aside money for tax preparation purposes regularly. Treat this as a non-negotiable business expense.
- Consider making estimated tax payments. By making quarterly payments, you can spread the cost over the duration of a year rather than struggling with a lump sum payment.
- Consult with a professional tax advisor. At Wichita Tax Advisors, our experienced team can guide you in forecasting your tax obligations accurately.
Employees vs Freelancers
When you hire employees, you become responsible for withholding certain amounts from their paychecks for federal and sometimes state income tax. In addition, you’ll need to pay the employer’s portion of Social Security and Medicare taxes, also known as FICA taxes.
Instead, it may be worth hiring freelancers on an hourly / per-project basis. You can expect to save 20 to 30 percent annually with a freelancer when you factor in not having to pay for company benefits, such as health insurance and retirement funds, as well as Medicare and Social Security.
Running a small business requires you to juggle many responsibilities, with taxes being one of the most important. By implementing a smart tax strategy tailored to your business, utilizing available deductions, and effectively managing your tax payments, you can minimize your tax burden, avoid costly penalties, and ensure your business’s financial health. At Wichita Tax Advisors, we are here to help you make it a reality.
Taking control of your tax obligations doesn’t have to be daunting or overwhelming if you approach it with knowledge and a strategic plan. Trust one of our expert Wichita CPA‘s and let us navigate through the complex world of taxes for you.