They don’t call growing your own business a “hustle” for nothing. It is a lot of hard work and can even take years to turn a profit. The last thing you want to do at the end of the year is pay a big tax bill. There are a variety of taxes that a business may have to pay, including income taxes, employment taxes, sales taxes, and excise taxes. Owing on all those taxes could feel like you worked all year for very little in return.
Luckily, there are several ways to lower your tax bill so you can put that money in your pocket or back into your business.
Maximize Deductions
Keep excellent records and receive guidance from a tax professional on all of the tax deductions available to you. Some examples include: car and truck expenses, salaries and wages for employees, contractor and freelancer payments, rent and utilities on business property or your home office, supplies, insurance, travel, advertising, and legal and professional fees.
Defer Income and Accelerate Deductions
Delay sending out invoices until later in December so that you receive the income in January, which puts off that income into the next tax year. Accelerate your deductions by paying your bills and invest in your business by purchasing what you need before the end of the year.
Structure Your Business Properly
If you have an LLC, would it be better to elect to pay income taxes as an S corp? If so, you can file a Form 2553 with the IRS before the middle of the third month of the year to elect S corp classification.
For more ways to reduce your tax liability for your business, contact us at H&H CPAs. We are happy to guide you through the different ways that you can save on your taxes.