6 last minute tax tips to help small businesses avoid overpaying Uncle Sam
- Small businesses often pay too much in taxes
- Push your tax pro for options — there’s usually more you can do
- Start planning now to maximize next year’s return
Small businesses pay nearly $1 out of every $5 they make in effective tax rate, and research suggests many small businesses may be overpaying taxes by an average of $11,638. But it doesn’t have to be that way.
“Taxation has become an increasingly complex environment, which has made it difficult for individuals and small business owners to correctly navigate the tax code,” says Caleb Cardon, Ph.D. E.A., managing partner of DBN Tax in Lehi, Utah. “This complexity costs individuals billions of dollars each year in unnecessary taxation.”
We chatted with Caleb to reveal 3 last-minute tips for small businesses looking to avoid overpaying on their taxes…
1. Don’t take “nothing” for an answer. “When your tax professional tells you what your tax liability is for the year, ask him/her what you can do to decrease it. Do not accept an answer of ‘nothing.’ If their answer is ‘nothing,’ then you need to get a second opinion. you may not like any of them, but you should always have options.”
2. It’s not too late for contributions. “As a small business owner, you can still contribute to a retirement account or fund your Health Savings Account (HSA). This can be a great way to get an immediate, large return on investment (ROI) with tax savings.”
3. Don’t wait for 1099s: “As a business owner you do not have to wait for a 1099 to file your business taxes. Business vehicles are either depreciation or miles, not both. If you depreciated last year, you do not have to track down your mileage for the year.”
…and 3 more to set you up for greater success when you file next year’s taxes.
1. Get organized. “Set aside time to get your accounting books in order. This will make your tax return cheaper to prepare and give you a better idea of the financial status of your business.”
2. Evaluate your entity structure. “Entity structure is the one single thing that can have the largest effect on your tax liability for the year. Depending on how much money your business made in the past year, you may regret not thinking about your tax structure (Partnership, Sole-proprietor or Corporation) before the end of the year. However, the IRS does provide some avenues that could allow to capitalize on the tax savings of entity structure this year. Ask your tax professional what choices you have.”
3. Start planning for next year right away. “There are always lessons to learn from closing out a year, and it’s best to apply those lessons quickly. This includes change in tax structure, separate bank accounts for your business, and personal expenses. Also, pay close attention to the Schedule M-2 on your business tax return (Partnership or S Corp). This tells you, as the business owner, what your equity is in your business. Make sure your tax professional is tracking this for you.”
* Special thanks to DBN Tax for sharing last-minute tax tips for small businesses.
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