Tax saving is an important matter for all types of business. However, the small business owner faces several difficulties due to the restricted amount of capital for the business. A CPA for tax preparation for years mentioned the importance of knowing the tricks and way to lower the taxes. An experienced CPA can help a lot in saving taxes.
In this current post, we will discuss some of the ways to save taxes for small businesses:
You must look for adjusted gross income (AGI)
One can adjust several tax breaks limitations through the AGI or Modifies Adjusted Gross Income (MAGI). You can avoid 0.9% Medicare tax over the earned income by not exceeding your AGI $200,000 in case of being single. However, if you are married it is more $5000.
Never to look over the carryover
Some limitations on the deduction and credits are there, which you cannot use in the same year. However, you have permission to carry some of them over to the next financial year. Therefore, it is important to keep track of those carryovers. You can use them in the next year.
However, if you will hire a CPA for tax preparation, they will automatically include this during preparing the tax preparation. Some of the examples of such carryovers are as follows:
• Capital losses
• Charitable contribution deductions
• General business credits
• Home office deduction
• Net operating losses
Related Article: Role of CPA’s For Business
Leave the Property rather than selling it
If you find a particular property has no value, it is better to leave it in the way instead of selling the property for a less amount. Remember that amount that you will get by selling the property will come under taxable income.
On the contrary, leaving the property as it is will be countable as a loss to the company, which is deductible.
You can classify the property under Section 1231. It allows you to show it as capital or ordinary loss.
Look out for tax-free ways to generate income
Salary, bonus, share distribution all come under the taxable income of the business. However, certain ways are there which do not come under taxable income. Your accountant can help you with the following matters:
• Medical Plans
• Retirement Plans
• No-interest or lower interest loans
Use the fringe benefits for employees
Giving fringe benefits to the employees can lower the amount of taxes for your business. in IRS Publication 15-B (2017), Employer’s Tax Guide to Fringe Benefits, you can find the details of the fringe benefits. Increasing the wages of the employee can increase the tax but give fringe benefits can be a smart way to avoid tax. Following things, you can consider in this regard:
• Health benefits
• Long-term care insurance
• Group term life insurance
• Disability insurance
• Educational assistance
Therefore, you can see several ways are there to save a good amount of tax. However, hiring a CPA for tax preparation can help you more to save the taxes for your business.
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