Here are even more ways to reduce your tax bite:
Lease your property to your business: If your business uses property that you personally own, you can save on business taxes by leasing the property to the business. The lease expense to the business is tax-deductible, and the income you generate personally from the lease income is not subject to Social Security tax. You can then take any applicable depreciation allowance for the leased property.
Use the law: In the past few years there have been a slew of tax changes that can help small business – everything from the Bush tax cuts to the stimulus law and more. This would be a good time then to check with an accountant or other tax professional.
Re-examine your business structure: If you have been in business for a while and are profitable, it may be smart to change your legal form of business. For instance, a growing S corporation may want to become a C corporation so as to take advantage of benefit programs limited to C corporations, such as group-term life insurance and various health-plan options. A newly-profitable sole proprietor may want to form an LLC to get personal liability protection, or form an S corporation to reduce the self-employment tax.
Be aware of deadlines: Make sure that you are paying your estimated taxes on time and in sufficient amounts to avoid penalties and interest down the road. Deadlines of which to be aware:
- Corporations must file their returns within two and a half months after the end of their fiscal year
- Quarterly estimated taxes are due four times a year: April 15, June 15, September 15, and January 15
- Sales taxes. Sales taxes are due quarterly or monthly, depending upon what state you are in
- Employee taxes. Employee taxes may be due weekly, monthly or quarterly, depending upon the number of employees you have
Delay your receivables and accelerate your expenses: At the end of the tax year, if your business expects to have significant income from accounts receivables, consider delaying those receivables until after the first of the year. Doing so will reduce your business' net taxable income for that year.
Similarly, if you anticipate a large tax bit at the end of the year, you might consider accelerating some expenses into the current tax year. Expenses that can be accelerated include corporate charitable contributions, a significant percentage of health insurance premiums for you if you are a self-employed individual, year-end employee bonuses, or any other tax-deductible expenses you are planning on making.
Here is one final tip: The IRS has an excellent site devoted exclusively to small business, with industry specific information, audit guides, links and more. Go to www.irs.gov/businesses/small/.
(For even more business tips and strategies, check out the new podcast on iTunes that I am doing in conjunction with Greatland called Small Business Success with Steve Strauss, Powered by Greatland.)