As a business owner, you should know how important it is to manage your taxes well. Corporate income taxes are one of the biggest taxes collected each year. In fact, corporate income taxes in 2015 comprised 11% of all taxes collected by the federal government. It’s important for businesses to lower taxable income and avoid drawbacks that can harm the company instead of helping it. However, taxes can be confusing and complex. So to help legitimately save money on taxes, this article is going to provide a few simple tips.
Utilize accountable plans
Companies that choose to reimburse employees for work-related activities like travel, materials, or other costs should consider using an accountable plan. This type of plan meets IRS requirements but does not report the reimbursements as income for employees. In doing this, companies can potentially save employment taxes and lower total taxable income. Furthermore, this type of plan can help employees save money on taxes as well.
Consider the business structure. Many business owners underestimate how big of a role their business structure plays in the tax treatment of the company. For example, those businesses that are based on a sole proprietorship or partnership may have less flexibility for tax treatment compared to companies as an LLC. Additionally, it’s important for owners to keep company and personal finances separate. While many business structures often combine personal and business finances, combining business and personal funds can ultimately do more harm than good. Keeping funds separate and establishing a clear business structure can make it easier to manage books and organize deductions.
Work with a CPA firm
Any company, big or small, needs the help of an accountant. Tax and audit services are not something that should be done internally due to their high importance. By choosing to receive help for a CPA firm, companies can ensure that their paperwork will be done correctly, on time, and in a way that saves them the most money possible. CPA firms are experienced in working with tax laws, can help perform necessary financial analysis, and can support businesses during an audit when necessary. Overall, a CPA firm can ensure a business saves money the correct way.
Hopefully, these tips will help business owners manage and reduce their taxes better. It’s important for business owners to carefully consider how their business is set up and run in order to reduce taxes. By choosing reputable tax and audit services, business owners should have the opportunity to save money on their taxes each year.