You cannot avoid tax. However, you can minimize the impact it has on your bottom line. There are different scenarios you might be in, but as planning how to pay your taxes can help you also think of the ways on how you can trim it. If you are one of those people who venture in small businesses, here are smart tips you can make use of to trim your taxes without violating the law or ending up in tiresome lawsuit.
- Invest on retirement plans
You can minimize your taxes by contributing to tax-deferred or tax-exempt retirement plans. Defer taxation will not just have you max avoid paying the full amount of taxes on your income but also max out your allowable annual contribution.
- Buying supplies or making group needed expenses at the end of the year
Purchasing needed items or supplies for your business operation at the end of the year can add to your deduction. This will allow you pay less tax as the expenses will be deducted from your year-end income. However, it is important to note about purchasing items. Group needed expenses may include office supplies, furniture, bill pre-payment, repairs and maintenance as well as travel bookings.
- Make a consistent and solid record keeping
Having a consistent and sold record keeping can help you get the most of the tax deductions as well as reduces your business tax liability. In this way, you analyze your finances easily and plan for minimizing your tax deductions easily.
- Defer some of your business income
Note that your taxes are not primarily based on your gross income but your taxable income. One of the advantages of being a business owner is deciding when to receive as well as acknowledge income on your business book. You can minimize your taxes by deferring your year-end income until the first week or two of the preceding year, which is January. LLCs, S corporations and sole proprietorship can make use of this strategy to minimize their upcoming tax bills this year.
- Deduct appropriate and reasonable business entertainment
Business entertainment costs may include catering meeting at your conference room, business lunch and more.
- Write off Applicable Taxes
You can write off taxes that are incurred by your business’ daily operation. The extent and the nature if your deduction will primarily depend on the sort tax involved. For instance, you can deduct sales taxes on the items you purchase for your daily operation.
- Deduct the cost of your business related travel
Maximize your tax deduction by pre booking trips schedule next year at the end of the year
- Make some donations
You can reduce your upcoming tax bill by making some year-end charitable contributions.
- Deduct your auto expenses
There might be some business related travel expenses that you incur in the course of your business. Deduct these expenses; including parking chargers, business related tolls and other business related travel costs on your taxable income to minimize what you will pay.
By doing these smart tips above, you can be sure that you can trim your taxes in the best way possible.