Paying tax is one of things no one can escape whether you are a business owner or an employee we all have to pay tax.
The world renowned Benjamin Franklin said Certainty? In this world nothing is certain but death and taxes. In this article I hope to highlight five small business tax strategies the IRS don’t want you to know which will help you get the better deal when it comes to paying your tax bill at the end of the year.
- START A SMALL BUSINESS starting a small business itself is a great tax strategy because you can claim back the cost of accounting, advertising, banking, consultancy, entertainment, marketing, meals, parking, travel, insurance, computer equipment, medical expenses, trade shows and training equipment and many more. So being able to get the cost of all these things back when doing your return is fantastic.
- SPEND WHAT YOU EARN the world of tax is baffling to say the least but a simple strategy is to realise spending what you earn means you pay less tax because taxes are payed based on the amount of money you have left after deducting all the expenditures not from the how much money you earn. E.g. Earn- Spend Pay Tax NOT Earn Tax Spend.
- YEAR END PREDICTIONS – with the planned changes in tax forthcoming it is worth considering thinking about your yearend tax predications and planning ahead. To explain above a certain threshold the percentage of tax you pay will increase so when completing your yearend predictions it may be worth factoring in any major expenditures you may require to ensure you are under the higher tax threshold and therefore pay tax at the lower rate.
- UNDERSTAND THE TAX CODE – having a good knowledge base of the tax code, how it works and the way to best utilise it is a strategy that the IRS don’t want you to know for sure. The IRS themselves would like to assume that they are the font of all knowledge and may only advise on the factors which will get you to pay the tax not the factors which allow you to pay the least amount of tax. When running a small business anything in the planning stage and especially financial planning is incredibly important to the success of your business, so if it means spending a little time researching the tax code it will be time well spent and will allow you to hold on to those hard earned pennies.
- THE IRS PREFER TO SETTLE OUT OF COURT if the unfortunate circumstances arise that you have to go through tax court it is worth noting that a more favourable outcome maybe to settle out of court. This is due to the immense workload and cost of a court appearance for the IRS themselves. Keeping this in mind during negotiations may give you an advantageous outcome.
There are many factors that will help you get the best deal tax wise in small business and knowledge is key so good luck and I hope these five small business tax strategies will help you along the way.