Taxes can be a complicated process for any individual. This process is even more difficult when you are the owner of your own business. However, there are a few ways that entrepreneurs can reduce the amount that they are required to pay on their taxes that are relatively simple. Learn more below from the experienced team at Parker Financial Services and contact us today for more information!
Stop Overpaying on Taxes
Invest More Into Your Business
Entrepreneurs should be aware of one of the first basic tax prep tricks — the more that you invest in your business, the more that you can make when it comes time for tax deductions. Hiring, purchasing equipment, and advertising are all viable opportunities to increase deductions when it comes time to file taxes for your small business. But, ensure that you do the math. Oftentimes, businesses can spend too much money in order to help with their taxes without weighing their spending against their potential benefits.
Include Personal Spending
One advantage that entrepreneurs have over normal taxpayers is that they have the opportunity to connect their personal expenses that are related to business to their company. It can be a tricky process, but if you are able to incorporate expenses, like those that you make for your home office, you have the chance to re-characterize those as being related to your company. But, be sure to do your research so that you can make sure that everything that you are claiming is legal. Better yet, partner with an experienced financial service to maximize your deductions.
Another way that you can reduce the amount that you are spending on taxes as an entrepreneur is to defer your taxes. While it may seem complicated, the ultimate process is fairly straightforward — you take a deduction at the time with the promise that you will pay the taxes later. This works well for those that are in lower tax brackets, but not necessarily those that are hoping to make it big in their industry. An individual might benefit from being in a lower bracket, but a successful business will likely end up in one that is higher. It is a good idea to consult with a professional tax planning service in order to determine what the right choice is for you and your company.
Change Your Tax Rate
When it comes to small business tax planning, things can get complicated. The tax code has many loopholes and ways where entrepreneurs can reduce the amount that they spend each year. One way to do this is to lower their tax rate by transferring portions of your income to capital gains. The difference can be immense. Individuals are often taxed at almost 40%, whereas capital gains taxes are right around 20%. An expert can help you with this process and help you save extensive amounts of money.
Navigating the world of small business tax planning is not an easy process. There are a variety of legal requirements that can cost you money. However, there are also opportunities for you to save if you are a savvy business owner. Ensure that you are not overpaying on your taxes by working with the team at Parker Financial Services. Contact us today for a consultation!