What methods can you implement when you file your business tax return as an employer, owner, and operator of a small business? Efficiently filing your taxes can maximize deductions and credits, shelter revenue, and contribute to employee benefit plans. The following tactics can help you and your employees yield yearly savings.
Accurate Accounting
The first step towards properly filing your taxes as a small business is accurately recording revenues, expenses, and wages. Most business expenses are deductible or can generate a tax credit; you might lose out on write-offs due to a lack of records or receipts. For example, a deduction can only be claimed for a business trip with the required documentation of receipts. Keeping these receipts and documents not only in your possession but also in an organized manner will serve your benefit should the IRS investigate any of your write-offs.
Hire a CPA
Hiring a CPA may seem like an unwieldy expense, but a tax professional can save money and time in the long term – whether by reaping tax savings or helping you avoid tax traps.
Employee Business Expense Reimbursements
Reimbursing employees for travel expenses, using their vehicle for business purposes, remote work-related internet access costs, and other eligible expenses can result in tax savings for your small business. While the company can deduct these expenses within allowable limits, employees are not taxed on the reimbursements. Importantly, these reimbursements are exempt from employment taxes. You can find the guidelines and details regarding accountable plans and their implementation in IRS Publication 463.
Employee Benefits
Deducting premiums for employees enrolled in a group health plan is possible, and in some cases, it may qualify for a tax credit. Alternatively, consider providing tax-deductible reimbursements through various health reimbursement arrangements (HRAs) instead of opting for a group plan. If suitable for your company, establish a Section 125 benefit plan, enabling employees to use pre-tax dollars to cover medical, dental, vision, and other eligible expenses up to an annual limit. A similar arrangement can be implemented for dependent care costs within a specified limit. By utilizing a Section 125 flexible spending account, employees and employers can reduce FICA taxes on wages allocated to the accounts. Additionally, employees may enjoy savings on federal, state, and local income taxes.
Retirement Plans
Similarly, by contributing to a retirement plan, you secure a current tax deduction and accumulate tax-deferred income for your retirement. If you have employees, the plan must extend coverage to those eligible to participate. The plan can specify or permit employer contributions, allowing employees to make pre-tax or after-tax salary contributions. Depending on the plan type, participant details, and contributions, you may be eligible for various tax credits to establish and contribute to the plan. Beyond tax benefits, implementing a qualified retirement plan can enhance the financial security of your workforce.
Post-Year-End Actions
Even after the year concludes, there are still opportunities for tax savings. When your business acquires equipment, it faces choices in accounting for the cost on the tax return, with the deduction being claimed upon filing. The expenses related to business driving can be deducted by considering actual costs incurred or utilizing the standard mileage rate set by the IRS. Your business’s legal structure under state law, whether a limited liability company or a corporation, significantly influences how income and expenses are treated for the business and its owners regarding taxes. Strategic changes in the business structure can be made to optimize tax outcomes, potentially resulting in lower tax rates on profits. For example, a sole proprietorship may opt for incorporation to provide the owner with personal liability protection and the option of income tax withholding from a salary, eliminating the need for the owner to make estimated tax payments.
The biggest takeaway is that many of your business expenses could score you tax deductions or credits that take the edge off the taxes on your profits. Thoroughly look at what credits and deductions your small business qualifies for. Taking the time to do so can save you money and benefit your employees, improving the health of your small business.
Estess CPAs is a professional accountant firm that brings years of experience and reporting standards along with a supporting team of experts. Therefore, your business will gain from improved efficiency, reduced business costs, accurate financial reporting, and tax planning. We proudly serve the Belle Chasse, Luling, and the Greater New Orleans Area. We treat your family like ours and can’t wait to help you improve your operations. Estess CPAs has become an industry-leading tax preparation and advisor firm, offering accounting and bookkeeping services. In addition to helping small businesses run efficiently and save on tax liability, the accounting firm provides a wide range of services, including tax services, accounting, bookkeeping, and payroll services. Free consultations are available by phone, video conference, or in person. To find additional information about Estess CPAs’ services and locations, call (504) 433-5122 (Belle Chasse office), (985) 785-1470 (Luling office), or visit estesscpa.com.
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