Keeping track of income and expenses is essential, even if you don't own a business. And if you do own a business, things get even more complicated. There are paychecks to issue, taxes to track, and subcontractors to pay out. All of these details are a whole lot less challenging when you hire an accountant to oversee them. However, it is still important to know a little bit about accounting yourself. Dig into the articles on this website, and you'll gain a better understanding of accounting principles, what services accountants really offer, and the benefits of hiring these professionals to assist with your finances.
Your tax liability can really impact your ability to run your business at a profit. When it comes to your tax liability, as a small business owner, there are steps you can take to reduce the taxes that your business has to pay in a legal manner.
Tax-Saving Strategy #1: Contribute to a Retirement Plan
As a small business owner, the money that you contribute to your retirement account is something that you can deduct from your taxes. You can also pay into retirement accounts for your employees and deduct that expense as well.
Paying into your retirement accounts is a great way to reduce your tax liability while also essentially paying yourself and taking care of yourself into the future.
Tax-Saving Strategy #2: Invest in Advertising
The investments you make in advertising can not only bring in more business, but they are also investments that you can deduct from your taxes. You can fully deduct all the money you spend advertising your business.
Keep in mind, advertising is a big category and extends far beyond running a television advertisement or putting an advertisement in your local paper. Advertising includes things such as sponsoring an event or contest. Advertising also includes things such as online social media advertisements or search engine advertisements. Things such as printing out business cards and flyers also fall under advertising.
Basically, most ways that you promote your business could count as advertising.
Tax-Saving Strategy #3: Charitable Contributions
As a business, you can donate money, property, or supplies to a charity and write it off on your taxes. The one important thing to note is that you can't deduct your time that you give to a charity.
Make sure any charity you donate to is a registered charity; unfortunately, donations on platforms such as GoFundMe usually don't count as charitable contributions. Verify the charity's official status before making a donation.
Tax-Saving Strategy #4: Contract Labor
If you contract labor out to independent contractors or consultants, that is a business expense. For example, if you hire a virtual assistant to run your social media channels, or you hire a freelance writer to create content for your blog, or you hire a business coach to help you grow your business. Just make sure you file a 1099form for these expenses.
When it comes to saving money on your taxes as a small business owner, be sure to pay yourself by keeping up a retirement fund where your contributions are tax-deductible up-front. Also, keep track of all the expenses involved in your business accurately; the IRS wants to tax you on the money you made, after all of your expenses, which requires you to keep track of all the money you invest in your business and subtract those expenses from the money your business brings in through the selling of goods or services.
An experienced public accountant can help you set up a retirement account, and they can help you learn how to keep track of all the business expenses and assist you with your taxes For more information, reach out to a public accountant.