Business Articles - Money Management

Small Business Tax Tips that Can Make a Big Difference

As in any business, with a small business contracting operation it is important to minimize expense. And like many people, contractors generally have professional specializations that don't help much when it comes to figuring out the best way to work with their taxes. The good news is that there are plenty of simple steps that any contracting professional can take to retain more of their hard earned money. Whether tax savings are put back into the business to make it grow or used to put you and your family into a better financial position, a good tax strategy is too valuable to ignore. Consider the following ideas:

  1. Take Your Small Business Home: The tax write-offs that come with basing your contracting business at home are substantial. Additionally, you can keep down overhead expenses that usually come with office space, utilities, and other expenditures. You will also have the additional benefit of working in a comfortable and familiar place.
  2. Get Your Taxes Done on Time: The IRS doesn't like it when it has to deal with overdue tax returns. Be sure that all of your taxes, including income, sales, payroll, and travel are sent in before the due date. Because of substantial late filing and payment penalties, getting taxes in before the deadline will save you time, money, and hassles.
  3. Incorporation: While many individuals are in business as partners or proprietors, incorporating yourself has some big advantages. Through personal incorporation, you can lower your liability for doing business. Also, there are lower tax rates for small business income that come with incorporation.
  4. Live your Life for the Best Tax Breaks: Shifts in your lifestyle can result in good tax savings. What about converting a spare bedroom into a small business office? Are you treating travel in your car as a potential business expense rather than a personal one? By keeping receipts for expenses on entertainment, such as dining out, as business expenses, greater tax breaks can result.
  5. Always Keep Your Taxes in Mind: Remember back in school, when you sometimes might leave a paper to the last minute? If you had been doing a little bit consistently, you could avoid the big rush at the end and the stress that comes along with it. In this way, taxes are similar to school assignments. Tax time isn't the only time you should be considering your tax position if you want to maximize your tax savings and returns. Whenever you are dealing with your money, whether it is about business or pleasure expenditures, think twice about the tax implications. This consideration will pay off when tax season comes around.
  6. Split the Income: By paying substantial wages to family members, you can divert money from your higher tax bracket to a child or spouse who is in lower tax bracket.
  7. Keep a Record of Expenditures: Always consider whether you are going about your business in a way that will stand up to a tough tax audit. It is important to keep receipts of entertainment expenses. Additionally, a mileage log for vehicle travel is also an important record to have when it comes time to account for it. With each entry from any type of activity, it is best to give an explanation of the business function of the expense.

While making tax-based decisions on a daily basis may seem unreasonable, especially with all the other concerns in our lives, there is plenty of reason in finding greater savings that can be applied to activities we truly find worthwhile. Like many valuable practices, solid tax thinking may take a little practice to get down as a routine, but the greater prosperity that may follow can make the trouble worth it.

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