Tax-Saving Tips for Small Businesses | Tally Services

One of the biggest ways small businesses are able to survive, and thrive, is by their ability to be lean and save money where they can. This allows for more cash to reinvest in the business, to hire top-notch employees, and ultimately grow. One of the best ways for small businesses to save money is on their annual taxes. Knowing how to properly utilize the available tax breaks for small businesses can mean the difference between a small and large tax bill. In this Tally Services blog, we’ll cover our best tax-saving tips for small businesses to ensure your business doesn’t overpay.

Tax-Saving Tips for Small Businesses
While taxes are complicated and oftentimes overwhelming, there are ways for small businesses to reduce their overall tax bill and save money. Use these tax-saving tips for small businesses as you complete your 2018 taxes and plan for next year’s filing:

1. Choose the Correct Corporate Entity – Just because you’re “small” doesn’t mean you can’t qualify to become an LLC. Even if you’re a single proprietor or a startup, if you register as an LLC, you can avoid some of the self-employment taxes and reduce your overall liability. Picking the right corporate entity for your situation can have a big effect on your overall taxes.

2. Deduct Your Equipment – In the new Tax Cuts and Jobs Act bill, businesses can now deduct the full cost of equipment and software up to $1M under Section 179. It used to be that businesses could deduct depreciation over 7 years, but now the full cost can be deducted in the year purchased. This major tax code change could have big implications for your small business if you have a lot of equipment and software purchases.

3. Home Office and Supplies Deductions – Many small businesses are initially based in the owner’s home. If your business is run out of your house, don’t forget to deduct part of your house as a home-office deduction and any supplies you use for your business, such as your cell phone, printer, and other office supplies.

4. Consider Contractors Instead of Full-Time Employees – If you have a small project or one-off work that needs to be done, you can save money on employment taxes by hiring a contractor instead of a full-time person. You can save on Social Security, Medicare taxes, and retirement expenses by hiring contract labor, plus you will only have to pay them through the completion of the project.

5. Track Your Expenses Appropriately – You might be surprised to find just how many small businesses miss out on mileage, entertainment, and other kinds of deductions because of the failure to track and document expenses. If your business accrues any of these types of expenses, use one of the many apps and online systems to manage and document these expenses so you can later deduct them. Doing so will reduce your overall tax liability and can save your business money.

6. Retirement Contributions – You can reduce your personal taxable income by contributing more to your retirement plan. Not only is this good for your future, it also allows you to claim it as a deduction. Granted, this money won’t be available until you reach a certain age, but you’ll get the money eventually and pay less in taxes now.

7. Keep Your Books in Order – As a small business owner, you likely don’t have time to waste in January and February struggling to get your books in order to properly file your taxes. If you keep your books straight all year long, you’ll spend less time in the first part of the year on your corporate tax prep. This will free you up to continue to grow your business and manage your team.

8. Get a Second Opinion – It’s worth paying for a second opinion to make sure you’re taking advantage of all the new deductions and following the rules under the Tax Cuts and Jobs Act to make your tax bill as low as it can be. Taxes are complicated, and professional accountants can help you wade through the options to make sure your taxes are correct and as low as possible. You’d be surprised to find that a professional tax preparer will often pay for themselves.

Could your business benefit from a second set of eyes? Do you need creating a system to keep your documents and receipts straight for next year’s tax filings? Tally Services is here to help! We’ll meet you exactly where you are and help you get and stay organized to make sure your tax bill is as low as can be. Contact us to learn more!