Tax Tips for Small Business Owners

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Last Updated on January 27, 2023 by Ellen

Looking for tax tips for small business owners? Talk to your tax professional about these things to reduce your tax liability this year.

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Looking for tax tips for small business owners? Talk to your tax professional about these things to reduce your tax liability this year.

Tax Tips for Small Business Owners

It’s that time of year again and I’m on the hunt for ways to reduce my side business taxes.

As a small business owner, making more money is always a good thing. But, because this is a side business, I want to be able to take advantage of as many tax deductions as possible.

When you make your appointment with your tax professional, be sure to ask them about these tips. Remember, I am NOT an accountant. I’m just suggesting that you speak to your tax preparer to see if these tips will work for your situation.

If you’re handling your taxes on your own this year, I highly recommend this book as a reference.

There are many things that happened last year that we’ve never had to deal with before. Make sure that you check to see how the Coronavirus Aid, Relief and Economic Security (CARES) Act changes your tax situation.

And, make sure that you talk to them about upcoming changes and how they will impact your taxes for next year. Always refer to the IRS website.

Take advantage of pass-through taxes

Pass through taxes refer to times that the business owner pays taxes on business incomes themselves instead of the business paying the tax. Just remember there are limits to this when it comes to deductions.

a calculator, pad of paper, and money on a desk

Set money aside for paying quarterly taxes

The last thing I want at tax time is a bill from the IRS. Make plans with your accountant to set up quarterly tax payments. This will help you divide your tax payments throughout the year rather than paying them all at one lump sum at tax time.

Ask about a retirement savings plan

This year we set up a SIMPLE IRA account so that I could defer my taxes this year.  This allows me to set aside employer-sponsored retirement savings. And, in my case, since it’s my full-time job that offers this, I get a matching contribution from my employer.

Remember that as a small business owner, contributions you make may be tax-deductible. Ask your tax preparer if this is one of the tax tips for small business owners that will save you money.

Don’t forget equipment deductions

Did you buy a new computer, printer, laptop, or smartphone? Have you purchased a camera or other types of large equipment? Make sure that you ask about deductions and depreciation you may be able to claim.

a woman using a calculator near a pad of paper and a keyboard

Ask about deferring expenses

If you use a cash basis for your taxes, you might want to consider accelerating cash collection and delaying deductible expenses for next year. To take advantage of this tax tip for small business owners, you will need to invoice your customers early and encourage them to pay. At the same time, pay bonuses in January rather than December.

Make charitable donations

Does your business feel that it has a social responsibility? If so, remember to make donations to your favorite charities.  Donations can provide a tax deduction that is usually the same as the fair market value of what you donated.

Remember your PPP loans

If you got a Paycheck Protection Program payment, you need to understand how they are taxes. In certain cases, you can apply to have those loans forgiven. But, the IRS has stated that for tax planning purposes you may have taxable income you’re not expecting. Speak to your tax preparer about this.

Did you defer your payroll taxes?

The CARES act lets you defer paying your share of 6.2% of Social Security Taxes. But, remember that half of those deferred funds have to be paid by December 31, 2021, and the other by December 31, 2022. Remember to plan ahead for this expense.

Looking for tax tips for small business owners? Talk to your tax professional about these things to reduce your tax liability this year.

Summary tax tips for small business owners

Speak to your tax preparer about these things:

  • Pass through taxes
  • Quarterly taxes
  • Retirement savings accounts
  • Equipment deductions
  • Deferring expenses
  • Charitable donations
  • PPP Loans
  • Deferred payroll taxes

Here are some tips for hiring a trustworthy tax preparer. And, you may want to consider reinvesting your tax refund into your business this year if you get one.

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