Tax time to many small-scale businesses is usually the most difficult time of the year. Most people tend to ignore the tax planning process which is a very important stage that needs to be planned earlier. Instead of rushing and wasting your time when it’s too late, you can simply take advantage of the tips below for good tax planning.
Get organized – most people hate the tax period because they are not ready or organized. If you have a problem with being organized then you can choose a day in every month so that you can compile all your important documents like the credit card statements, bank statements, and invoices and this helps you keep track of your business expenses.
Give to charity – most consumers like above 90% support businesses that play a charitable role in the community. When it comes to charity, you need to choose a competent charity to make a donation for the simple fact that time volunteered is not taxed while any supplies you may sell during that time can be taxed. In case you donate cash make sure that you keep the receipts received from the charity well. You can also donate items like clothes, furniture, stocks and household goods and then claim a deduction for the fair market value.
Maximize your retirement plans – investing yourself is the best thing you are yet to do now. Deduct your retirement money from your income and this also reduces taxes. Here are some of the retirement plans that you should consider; Defined benefit plan, Simple IRA, Solo 401[k], Simplified Employee Pension [SEP IRA]. You need to consult a professional before opening any of these retirement plans.
Run an inventory check – depending on your accounting methods you can claim a deduction if the market value of your inventory drops. Check with your accountant to make sure that it applies to you.
Take section 179 Depreciation deduction – spend your money on making purchases of the items your business needs so that you can get maximum deductions. This deduction allows you in the same year that you bought the item to recover its full cost, it can be up to $500,000.
File your business taxes – make sure that you file all your business tax returns on time to avoid penalties. If you want to file your federal returns for free you can use Turbo Tax, you can also use Turbo Tax to file state tax at a fee and make sure that receive a confirmation.
Defer income – if you do not want your income to be counted for the current year then you can shift them to the next year using the help of your accountant and this can help you reduce your tax bill.