Business taxes are the sore spot of every business owner. If there were ways of legally cutting your business tax expenses, wouldn’t you want to take advantage of them? There are tax strategies that a qualified and experienced CPA can help with. Here are simple ways to cut your business tax expenses.
1. Take a Salary Cut
It may not sound like a good idea, but taking a salary cut can significantly reduce your business taxes in the form of the employment taxes you have to pay each month. FICA and state and federal taxes cost a considerable amount of change. If a salary cut is manageable, it’s worth considering, depending on how much you pay in income taxes every month. If you don’t want to take a permanent salary cut, you could opt to defer income for a temporary amount of time. If you’re looking for a short-term way to cut business tax expenses, a deferment of income is a good option to consider.
2. Pay Down Debts Before the End of the Year
Depending on how your business is organized, you may have to pay taxes on annual profits. You can reduce business taxes and help your business by paying down debts early, by the end of each year. If you have recurring debts, you can make early payments in order to reduce your profits on paper and end up owing less in taxes. As long as you cut the check and mail it by December 31st, this strategy will work.
- Work With a CPA
There are numerous tax changes that occur throughout the year. As a busy business owner, it’s nearly impossible for you to keep up with them all. However, it’s the job of a CPA to stay abreast of all the tax changes as they happen. Your single best strategy for ensuring you get all the business tax breaks you’re entitled to is to work with a CPA.
4. Make Contributions to a Retirement Plan
Another smart strategy to save on business taxes is to make yearly contributions to a retirement plan. This reduces your business profits, yet gives you the benefit of tax-deferred earnings on your retirement plan. You have until March 15thto make the contributions. Your form of retirement plan may have limits on contributions. Consult with your CPA to learn more.
These are four effective ways to cut your business tax expenses. Your CPA may have additional strategies for you, depending on your business structure and individual situation. For more information, please contact us today.