Top Small Business Tax Tips

4 min read · 5 months ago

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There are many dire sayings that capture the thrill that is doing taxes. They may make you laugh, but it is still safe to say that managing tax filings is not one of the fun parts of owning a business. This roundup of small business tax tips can help.

Don’t overlook the importance of managing business taxes each year. You could end up running afoul of the federal, state, and local government. That can prove not only inconvenient but also costly. 

This collection of best practices can help you keep better track of small business tax liabilities and stay on top of your small business tax bill:

  • Keep good records
  • Separate business and personal accounts
  • Claim all your income reported to the IRS
  • Follow small business tax strategies to reduce income tax
  • Make charitable contributions
  • Hire professional help

 

Keep Good Records

One key piece of small business tax advice? Start out keeping careful track of your finances. You’ll also want to know in advance what types of taxes you may be responsible for and the deadlines. 

Depending on your business, you may owe:

  • Employment taxes
  • Estimated taxes
  • Excise tax
  • Income tax
  • Self-employment tax

Good records are key. For example, in an infographic on small business taxes, we previously cited the statistic, “1 out of 4 small businesses lose track of whether or not a customer has paid over the course of the year.” Along with accounts receivable and collections, you also need to monitor business cash flow, track your receipts, and keep records of payroll and other payments.

 

Separate Business and Personal Accounts

The IRS is always on the hunt for small businesses not paying taxes. If you get audited, one of the first things they will do is review your professional and personal accounts to look for any commingling. 

“The IRS looks for personal expenses reported as business expenses,” former online accounting system CEO Steven Aldrich told Business News Daily. Another tax expert told the publication, “the IRS commonly looks for certain types of business tax deductions – such as those for home offices; meals, travel, and entertainment; vehicle use; and real estate losses –  to make sure taxpayers are adhering to limits and regulations.”

 

Claim All Your Income Reported to the IRS

You may want to figure out how to pay no small business taxes, yet small business tax avoidance is not a good idea. Know that the IRS gets a copy of all 1099-MISC forms you receive. That means they can and will check that the income you claim matches what has been reported. 

You should also report income that is not recorded on 1099-MISC forms. It is not advisable to treat any of your income as if it could be a small business tax shelter. As part of its Financial Education Curriculum, the Small Business Administration offers a guide on Tax Planning and Reporting for a Small Business that could prove useful.

Learn about the advantages of being ready to pay your taxes earlier to avoid it costing more.

 

Follow Small Business Tax Strategies To Reduce Income Tax

Follow Small Business Tax Strategies To Reduce Income Tax

There are many ways to reduce taxable income for small businesses. Start by researching tax credits such as the general business credit, investment credit, credit for employer-provided childcare and facilities, the Indian employment credit, and more.

You may also want to look into your section 179 eligibility. According to the IRS, this “allows taxpayers to deduct the cost of certain property as an expense when the property is placed in service.” You can also cut tax liability by investing in employees and making smart purchases and investments.

Further, it can help to follow small business tax tips regarding deductions. Common ones include:

  • Mileage
  • Home office
  • Salaries and wages
  • Furniture and equipment
  • Advertising
  • Depreciation 
  • Utilities
  • Travel
  • Insurance
  • Legal or professional fees

 

Make Charitable Contributions

Not only is this a great thing to do from a business sustainability perspective, but you can also cut your tax liability. 

You can donate cash, merchandise, or other assets and be entitled to a deduction on your taxes. Request a receipt from the 501(c)(3) charitable organization to show that you are giving back to your community and to get the tax benefit too. For help determining the fair market value of your donations, try this free TurboTax tool.

 

Hire Professional Help

Hire Professional Help

It can also help to hire professionals to either manage your payroll or help with your small business tax bill. Bookkeepers and accountants could share small business tax tips that you wouldn’t know about otherwise. 

It’s not all about how to lower your small business taxes, though. Chandra Bhansali, CEO of Accountants World, told Nationwide, “your accountant should work with you throughout the year to track income and spending, to make sure you don’t have a cash flow problem, and to monitor your gross and net profits.”

 

Tax Advice for Small Businesses

Armed with these small business tax tips, business owners can save money and avoid tax costs. You can also find more tax advice for small business owners in our Resource Center.