The best way to deal with taxes and avoid stress-related to filing taxes is to ensure that you are prepared for the big event. The sooner you start, the more prepared you are at the year-end with the tax credits and tax deductions for your small business. We have put together four tax planning strategies for your small business in 2020 to help you maximise your credits and debits.
1. Understand the type of taxes you must pay for your small business
As a small business owner, you must understand the rules of taxes. Ensure you have up-to-date information regarding the tax rules that apply to your small business. Bear in mind that you might need to pay several types of taxes, depending on the legal structure of your business, what industry you belong to, and the specifics that apply to your company. Be aware of:
- The types of taxes you must pay
- The amount of money that you must pay under each kind of tax
- When the payment is due for each tax
- How you will pay your taxes
Just as vital as taxes is the necessity to protect your customers and your small business with reliable public liability insurance. This insurance is designed to protect your business in the event it is sued for personal injury or death or even damage to property. Check this article for tips to get the best public liability insurance for your business.
2. Get yourself a trusted tax adviser
While you must understand the tax rules of 2020, never underestimate the value of a trusted tax adviser, CPA or qualified tax professional. A tax adviser or professional can ensure the best tax planning strategies are in place, answer your tax-related queries, ensure accurate reporting and provide you with detailed information on tax laws. They will also be able to give you precise information on your tax deductions, what taxes are due and when they are due and mistakes that you must avoid.
3. Invest in a reliable tax planning software
Ditch the paperwork. Tax planning software is a necessity for small business owners. Not only is it reliable but it finds and maximises all your missed or hidden business deductions so you can lower your small business tax rate. Most tax planning software for small businesses also includes e-filing features that make online tax filing easy.
Choosing the right tax planning software for your small business is critical. Choose one that is continuously up-to-date (older editions will be erroneous), asks questions regarding your business at regular periods, calculates your deductions based on the latest small business tax law and is accessible online.
4. Keep an eye out for eligible claims and deductions when filing for tax
Claiming too many expenses can indeed signal a warning to tax office but you can still safely maximise your claims. Talk to your CPA about whether you are eligible for various types of credits and deductions. You might also make alterations in the way your business operates so you can become eligible for certain credits.
For example, health care tax credit can produce considerable savings. You might be eligible for this if you have fewer than 25 permanent/full-time employees.
You might be eligible to claim work opportunity tax credit if you hire disabled people, veterans, or even other disenfranchised groups.
If your business provides its employees with child care expenses, you might be eligible to receive a tax credit.
Other claims you can consider are:
- Startup costs incurred to get your business going
- Education for classes related to the business
- Business services that help your business run like a WIFI plan or even the use of PayPal
- Inventory deductions for unpaid goods
- Interest accrued from business loans and credit cards – with this in mind, if you would like further information about some of the different loans out there for small businesses (such as the Shuttered Venue Operators Grant or SVOG), you can find SMB SVOG Loan help on the Zenefits website.
Some deductions you could be eligible for include charitable contributions, miscellaneous deductions (like newspapers bought for business reasons and business travel expenses) and health care premiums.
In conclusion, don’t presume that last year’s tax planning strategies will minimise this year’s tax bill.
Meet with your tax professional before year-end. While there is a chance that some tax provisions affecting small businesses might remain relatively unchanged this year, your specific business situation might have changed. Don’t presume that the successful tax planning strategies that you used last year will work for you and minimise your coming tax bill.
Meet with your tax professional to identify the most optimal year-end tax planning strategies based on your most current circumstances.