Save time and money with these small business tax strategies from John F. Dennehy Jr. CPA, PC. Contact us today for innovative small business tax planning strategies.
Researching small business tax strategies is a year-round event - if you are interested in saving money and minimizing your overall tax bill. Whether it's finding tax-friendly ways to operate your business, capitalizing on business deductions, or surviving an audit, the tax experts at John F. Dennehy Jr. CPA, PC can help. Continue reading to reduce the panic around tax planning and learn a few of our most common small business tax strategies.
What Are Small Business Tax Strategies?
Today, small business owners have access to a virtually endless number of tax planning strategies. Some are aimed at the business itself, while others are designed to reduce the owner's individual tax situation. In either case, the strategy will be based on accomplishing one or more of these overlapping goals:
- Taking advantage of all available tax credits
- Lowering your tax rate
- Minimizing your amount of taxable income
- Managing the time when taxes are required to be paid
- Controlling the effects of the Alternative Minimum Tax
- Circumventing the most common small business tax planning mistakes
In order to effectively plan for you taxes, you must estimate your business and personal income over the next few years. This is because most small business tax planning strategies are designed to save income tax at one level, but create a bigger tax bill for other income levels.
Avoid having a great tax plan that is turned rancid by poor projections of income. After you have an accurate estimation of your income, the next step is to estimate your tax bracket.
Estimating Tax Brackets
One of the most difficult parts of small business tax planning is developing income estimations. Due to the very nature of any estimate, it will be inexact. However, you should already have projections of your cash flow, income, and sales revenue for quintessential business planning purposes.
If you use the GAAP method of accounting, making these projections will be exponentially easier. In any case, the closer your estimates, the more likely your tax planning will be successful.
Common Small Business Tax Deductions
Automobile Deductions
If you use your personal vehicle for going to business meetings , visiting clients, or other business purposes, you may be eligible to take a deduction for the cost of maintaining and operating your vehicle. These common business deductions may be accrued using actual expenses or by simply taking the the standard mileage deduction.
If you own two cars and use them both for business, you may be eligible to increase your deductions and include both vehicle. Regardless of the method you choose, make sure you keep accurate records, such as receipts and mileage logs.
Business Entertainment Expenses
Entertainment expenses are legitimate dedications that may save you money by lowering your tax bill. To claim the deduction, business dealings must be the topic of conversation before, during, and after the meal. In addition, the environment must be conducive to business. In other words, a nightclub may not be the ideal place to claim a business entertainment expense deduction.
Home Office Deduction
If you work from home, you may be eligible to deduct some of the office expenses. A few simple ways to increase your eligibility of qualifying for this deduction is to:
- Display your home address and phone number on business cards
- Dedicated long distance phone chargers
- Require business guests to sign a guest book when visiting the home office
- Document a work and time log activity
- Keep all paid invoices and receipts
Avoiding Isn't Illegal - Evasion Is
Avoiding small business tax planning isn't illegal, but tax evasion is and can be exceptionally costly. Tax evasion includes subterfuge, the reduction of your taxes through deceit, and concealment. In most instances, the one thing that sets tax avoidance apart from tax evasion is the Internal Revenue Service discovering the business owner had fraudulent intent.
A few of the main areas the IRS focuses on to determine fraud include:
- Claiming improper or outright fictitious deductions on a tax return. An example of this would be a taxpayer's claim of a substantially large charitable contribution to earn a deduction when no form of verification exists.
- Failing to report relatively large amounts of income, such as a store owner not reporting part of the receipts or a shareholder failing to report dividends.
- Allocating income fictitiously to a related taxpayer who's in a lower tax bracket. For instance, if a business initiates distributions to children of the controlling shareholder, this would be evasion.
- Irregularities in accounting, such as a major discrepancy between amounts reported on firm's financial statement and its return, or a business's failure to keep proper records.
Contact John F. Dennehy Jr. CPA for Year-Round Small Business Tax Planning
Today's business owners are more crunched for time than ever before. In the midst of running a business, growing the business, and finding personal time - keeping up with the latest money-saving small business tax strategies can appear to be outrageous.
Instead of going at it alone and potentially losing thousands of dollars in tax deductions, trust the seasoned tax experts at John F. Dennehy Jr. CPA, PC. We offer decades of experience and are dedicated to staying up to date on all of the latest changes to the tax code.
Call John F. Dennehy Jr., CPAm, PC today at (631) 928-5406 or complete our Online Contact Form.