5 Little Known Ways To Reduce Small Business Taxes
Businesses are always looking for ways to cut costs, especially during these uncertain times. Every little bit counts when it comes to taxes. Did you know there are several techniques that your small business can use in order to save money? Here are 5 lesser known ways to reduce small business taxes.
Reimburse Employees Using an Accountable Plan
Many businesses reimburse their employees for work expenses such as travel, food, office supplies, etc., so why not do this with an accountable plan? Using this plan will reimburse your employees, but will not categorize this payment as income for them. This will help the company in saving money on employment taxes, while also helping your employees save money on their personal taxes.
Do Year-End Planning
Year-end planning can be used to help you utilize techniques that involve delaying income and accelerating expenses. Your options to do so depend on certain elements like the type of accounting you use (cash, accrual, modified, etc.), and are an excellent reason to discuss your year-end situation with a CPA.
These options, among others, are useful tools for lowering tax liability. Also, with year-end planning it becomes easier to file and submit your taxes on time, which will help your business in the long run. Even if you need more time to pay, it’s important to still file your taxes by the deadline to avoid excess penalties and fees.
Have Lunch Meetings
If your company frequently buys lunch (or any meal) for clients or employees, you could be saving on taxes. As long as those lunches aren’t excessive and are justifiable business expenses, you may be eligible to deduct up to 50% in meal expenses. Be sure to keep your receipts!
Hire a Family Member
Hiring a family member is much like hiring a typical employee, and they should be treated as one. However, the IRS offers several tax benefits for hiring family members – including adult children. Certain family members will be exempt from Federal Unemployment Taxes (FUTA); this will depend on the relationship to the person and the type of business entity you have. Your minor children may also be exempt from federal and state withholding, in addition to FUTA. Employing a family member can be a great opportunity transfer income outside the business, while avoiding the expense of some employment taxes.
Use Your Personal Cell Phone
These days, everybody has a personal cell phone, but very few still have a business phone as well. Believe it or not, using your personal cell phone for business calls can actually save you money on taxes. Keep your phone statements and discuss with your accountant what percentage can be claimed as a business expense.