It’s a common situation that as soon as the tax time approaches, small business owners start losing their sleep over tax payments. If you are a small business owner, you may relate to this. That’s why, it’s always better to prepare well in advance, in order to face this crucial time of the year with courage. The key factor that differentiates a visionary business owner from the crowd is his ability to think ahead. To encourage this type of mentality and the spirit of thinking ahead, we have compiled a list of tax saving tactics. We are sure that these tactics would not only help you in saving a considerable amount of taxes but also make you a smart financial manager at the end of the day. The strategies are especially beneficial for end of the year taxes and Q4 tax payments.
In order to take full advantage of the tax savings; the most important thing that you should do is to keep track of the tax opportunities. There are several methods that you can employ to accomplish this. For instance; a tax diary, a tax diary is a wonderful way to keep you updated, about all the tax saving schemes and opportunities out there. Another important tool that should be in your arsenal is rock-solid tax organizer. As a business owner, you must already be aware of the importance of saving and keeping safe all your receipts and documents. Another thing is the knowledge and education of tax policies and deductions. These may not provide you the overnight results, but can be a great asset in the long run. Above all, who can underestimate the importance of a good tax advisor? A good tax advisor is the person who is always willing to listen to your side of the story, your views and your plans, in addition to offer his suggestions. There is nothing better than having a Hoffman and Associates to handle and mange your income tax process. It’s always recommended to communicate regularly with your financial advisor or bookkeeping service. Prepare a checklist of the things with their help that you may need at the time of tax payment. This strategy will be very helpful in preventing the chaos and confusion that may arise during the eleventh hour of tax payment.
To prepare you well for the tax payments, it’s often recommended to get enrolled in one or more benefit plans. These plans can save you a significant amount of tax breaks. Contributing in a defined benefit plan is always a better idea than to contribute in a contribution plan, especially if you are a small business owner and you are over 50 years of age. The reason is that you can contribute more in defined benefit plan. More contributions effectively means more tax savings.
Another income tax aspect that can cost you heavily is your purchasing decisions. Although in most of the tax plans, making purchases for your business is considered as a tax saving tactic. However, it is highly recommended to take the recommendations of a professional tax advisor before making any big purchases. Lastly, in case of 1099 employees, it’s recommended to set up your quarterly payment estimates; if you haven’t already done so. This will effectively help you in sorting out your cash flow, which in turn can prove to be beneficial for substantial income tax savings.
For general tax deductions, experts are of the opinion that you should enroll in a simplified employee pension plan (SEP). This approach plays a very important role in tax saving benefits for your contribution. Most importantly, a small business owner should be smart enough to take advantage of minor tax saving opportunities that come his way, such as incurring costs in dry cleaning or certain educational events for the employees, mileage deductions for driving etc. These minor opportunities would add up eventually to make a substantial difference.
As far as the yearend tax payments are concerned, remembering little things can make all the difference. For those, who have received salaries this year; tax relief act of the previous year would be applied. While in 2011 there was 100% depreciation bonus on any purchase for the new equipments and machinery for the business. That’s why it was considered to be the best time for making big purchases. But you don’t need to worry if you haven’t done so. In 2012 the depreciation bonus may fall down to 50%, but according to experts, it can again go back to 100%. That’s why it’s not recommended to repeat the mistake of the previous year. Make a list of equipment and machinery that you think would be beneficial for your company and keep your eyes and ears open for the announcement for depreciation bonus.
This is only a preview of the ways, in which you can save substantial amount of tax. In depth study and implementation of these techniques can effectively maximize your tax savings.