Tax Planning For Small Businesses

If you want to minimize your tax burden, tax planning should be done all year.  Whether you are looking for tax friendly ways to run your business, capitalize on deductions, or survive an audit the following strategies can help reduce your tax bill and make paying taxes less anxiety provoking.

Do the research and/or hire a professional — Your taxes are not something you should take lightly.  For inappropriate or late filings, there are penalties, fines and punitive interest costs.  Income tax, sales tax, and payroll tax must be calculated correctly.

Take advantage of deductions — You might not be aware of the many deductions that are available to you.  Taking advantage of deductions allows you to deduct business costs from your gross income.  Automobile expenses, home office deductions, travel and entertainment expenses are deductions small business owners should research and take advantage of.

Know how to classify your business — You can lower your tax rate if you classify your business correctly. Research the different types of business classifications as the different types of businesses classifications face different tax liability and rates.  Know which ones are best for you.  Some of your options are: Sole Proprietorship, Partnerships, Limited Liability Corporations, S Corporations, C Corporations.

Control your tax due date — Small business owners might want to ask for an extension on taxes, but know they are not always approved and it is only an extension to file not an extension to pay.  Other options for delaying your due date include delaying certain actions and accelerating others.  You might consider delaying collection of payments and the sale of assets.  These two actions are best left until the New Year.  Actions you might want to accelerate are real estate purchases and equipment purchases.  These will also help delay the process.

Negotiate a monthly payments — If you have difficulty making your tax payments, it helps to negotiate a monthly payments with the IRS,  this will allow you to pay off the IRS in smaller increments.  Based on need and eligibility there are different payment plans.  Many times these payments are beneficial to small business owners, however be aware of interest payments – they can be more harmful than helpful.