As a small business owner, we understand that filing taxes is challenging for you. Running your business can be stressful enough without the tax season adding to it.
However, educating yourself about tax filing strategies and starting early preparation is recommended to save yourself some serious heartache.
There are various deductions and claims that you, as a business owner, can use to reduce your tax payable.
Here are some tax filing strategies to follow to maximize deductions and credits.
1. Contribution to Charity:
If you made any charitable contribution in 2020, it is time to claim a deduction. The CARES Act enables you to avail a one-time deduction of up to $300 for payments to charity.
Businesses, like a sole proprietorship, partnerships, S-corporations, and LLCs, cannot claim this as a business expense. However, a business owner can claim this deduction made by the business on Schedule A of Form 1040.
2. Deduction on Property Expense:
If your business possesses a 179 property, you can deduct up to $1,000,000 of the property cost. Claim the entire amount as a deduction in the year your enterprise started using the property. This deduction is a boon for new or relocated businesses in sectors like manufacturing and retail.
3. Credit for Child Care Expenses:
Avail tax credits if you pay for your employees’ child care expenses. The credit amounts to 25% of the child care expenses to a maximum of $150,000 per year. Make sure that you keep track of this expense as it can give you easy tax savings.
4. Work Opportunity Tax Credit:
If you are hiring veterans, disabled people, or members of the disenfranchised groups, did you know you could claim a tax credit? An eligible business can claim up to 40% of the first $6,000 paid to a newly hired employee from these categories. Along with the satisfaction of doing your bit to support these individuals, you can get a deduction too.
5. Miscellaneous Expenses:
Every business has miscellaneous expenses that might not be big. Yet keeping a record of those can be beneficial as you can claim for deductions.
Any expense for operating your business is eligible for a deduction, like your business magazine bill or business travel expenses. These small expenses can turn into a substantial amount when aggregated, so keep track of them.
The goal of a business owner should not be limited to a higher revenue but also a substantial year-end profit. Taxes can eat into your profits unless managed wisely.
You would not like to pay more than you have to the IRS, would you? Of course not. So spend time on tax planning that will pay you rich dividends.
However, if you are tied up with your business and can’t spare time, it is a good idea to connect with a professional CPA or CFO to take care of finances and tax filing strategies.
We hope this article gave you some idea about what deductions you can avail for your business.
If you would like to watch the video of this article, click on the link below:- 5 Must Know Tax Filing Strategies For Every Small Business OwnerOther Accounting Related Information