You don’t need to pay extra taxes over what the law requires you. According to Albert Einstein, the hardest thing in the world to comprehend is the income tax. Significant activities that can have great returns in your business life is finding ways to have your small business taxes legitimately minimized to avoid pitfalls.
Unfortunately, more than 90 percent of small business owners have their taxes overpaid. It is now understandable why these businesses overpay their taxes considering the United States tax code has more than 60,000 pages that even accountants have trouble navigating through them. For the small businesses, here are some of the ways you can save money by avoiding paying unnecessary taxes.
1. Keep an eye on AGI.
Many tax limitations, additional taxes, and breaks tee off the modified adjusted gross income or the adjusted gross income that often appears same as the AGI for most tax filers. For instance, you can avoid a 0.9 percent medical tax on earned income from self-employment or on salary if your AGI never exceeds $200,000 if you are not married or $250,000 if you join them with your spouse.
2. Use accountable plans.
If you have your employees reimbursed for tools, travels, entertainment, you can do so using the IRS requirements to meet that plan. This is called the accountable plan. The business deducts the expenses, with this plan, but never reports that reimbursements as income to their employees. This saves the business or company employment taxes.
3. Make smart tax elections.
For optimum results, you can choose to make tax elections even though the year has ended to impact your taxes. For instance, the cost of acquiring equipment or machinery is allowed to be deducted from the tax. However, you can ask your accountant about the depreciation of these items if you are not profitable or just starting up. For future years, this helps reduce your taxes up to 15 percent.
4. Don’t overlook carryovers.
Certain credits and deductions have limitations that prevent you from utilizing them for the remaining part of the year. However, they could be permitted to be taken to future years. Track the carryovers to help you get prevented from taking them to future years. Tax preparation programs can do this automatically.
5. Use tax-free ways to make your business profitable.
While share distribution, salary, and bonuses are profits that can be taxed, many ways are available to help you benefit from business success without taxation. Talk to your accountant about the benefits minimizing tax and the business loans.
You can reduce the tax amounts if you exploit the opportunities and advantages for you. Collaborate with your tax advisor to discover them.