How to reduce the expense of business taxes
One of the events that are most dreaded by small business owners, is the payment of taxes. Business owners find that they are constantly up against paying some form of taxes. This can include: payroll taxes or business profit taxes. Because of the significant expense of taxes, business tax expenses really need to be managed to insure that you are not paying more than you have to. One of the major ways to help minimize business tax expenses is to make sure that tax reports are filled out correctly, and that they are filed on time. This strategy will help you to reduce business tax expense, by reducing the chances that you will be fined for filing late, or for making a mistake that leads to an overpayment, or an underpayment. To help insure that all tax reports are filed on time, and that they are correctly filled out, it can be helpful to do the following:
- Make out a calendar of due dates of specific tax forms and reports
- Have the instructions for filling out each tax form and report, on hand in hard-copy
- Make sure that the employee(s) that is filling out the reports is trained in doing so, or has access to help.
The other important strategy that you can take to insure that you are not paying more business taxes then you have to is to make sure that you are claiming as many business expenses, as possible on your income tax return, In order to do this you will need to do the following:
- Know what things qualify as a business expense
- Know what form or line, the business expense will need to be accounted for on
- Know how to keep track of your business expenses.
The first step of knowing what qualifies as a business expense is the most crucial. To help you learn what qualifies, for a business expense, and how much of the actual cost is tax deductible, you will need to find the appropriate IRS publication, for the tax year you are filing. This publication will outline everything you need to know about business expenses, when you are filling out your annual income tax return. Because tax laws change from year to year, the IRS will publish a business tax publication that will help you know how to deduct business expenses such as:
- Employees' pay
- Retirement plans
- Rent expenses
- Interest, taxes
- Business costs that you can deduct or capitalize
- Business bad debts
- Electric and clean-fuel vehicle deductions
- Miscellaneous business expenses
This publication will also let you know how to get help, for filing business taxes, if you need to.It is important to familiarize yourself with this publication. This publication also tells you where each type of business expenses will need to be accounted for and what forms you will need to fill out.
Finally, you need to know how to keep track of your business expenses to support your claims. You want to be able to show that you have these expenses in relation to your business operation. To keep track of your business expenses you should have a filing system, for all of your receipts and invoices for supplies. You will want to keep your receipts organized, so if you are audited, you will be able to quickly retrieve the receipts that you need to prove your deductions were valid. This should include a separate folder for:
- Employment tax expenses including a photocopy of the reports
- Forms, checks, and payment coupons that you submitted to the IRS and state department of income tax
- Receipts for use of petty cash
- Signed employee expense forms that detail what expenses you reimbursed your employees for.