It’s never too late to learn ways to save big when preparing your business taxes.
1. If your business entity is not established yet, do it now.
If you are paying way too much on self-employment tax, then it’s time to establish your business entity. Filing articles in January of the New Year is a sensible and economical small business tax savings strategy as some states impose franchise taxes and fees in the beginning of the year.
2. Include your children on payroll.
Most small business owners don’t realize that paying your children for services is a tax savings tool. For example, if your child is less than 18 years of age, and you are a sole proprietorship or single member LLC, your business is not required to withhold FICA or payroll taxes. Additionally, your child can use the standard deduction against any income you pay, since that sum is earned income and does not require income taxes.
3. While you’re at it, add your spouse on payroll.
But only add your spouse on payroll if he or she wants to contribute money to your company 401(k) for tax-planning purposes. Otherwise, generating earned income for your spouse and subjecting it to payroll taxes would not make sense as that deduction will end up on your joint return anyway.
4. Buy a vehicle.
Who doesn’t like deducting mileage? If you use a truck or commercial vehicle for your business, consider purchasing one that weighs more than 6,000 pounds. The deduction for depreciation can be quite a tax saver, of course depending on the cost of the vehicle itself and the business use percentage.
5. Get advice from a tax accountant.
To take advantage of these tax savings strategies for your business, prepare your books first. That way you can make the most informed decisions. So the number one tax saving strategy would be to get a tax accountant’s help!