With 2014 behind us, income taxes are on our minds right now. There is little we can do to reduce our tax liability for last year (except setting up an IRA and making contributions by April 15), but this is a good time to start tax planning for 2015. Here are 10 ways business owners can reduce their tax liability:
- Closely track tax deductible expenses, using software like QuickBooks or an app like Expensify. Track everything from mileage and business lunches to business travel and moving expenses. If you have employees, add them to your Expensify account to track their expenses as well.
- File your taxes on time. This might seem obvious, but not everyone pays their taxes when they’re due, racking up late fees and penalties. Visit IRS.gov for tax filing due dates and circumstances under which the IRS might waive penalties.
- If you are anticipating an exceptional year in terms of revenue, consider accelerating the time line on major business purchases to offset this year’s revenue.
- Start a profit sharing plan to put away as much money as you can as the business owner. Our team of retirement planning experts can help you choose the right plan for your company and set up the plan to maximize your contributions. Ask us how.
- If you own multiple businesses, create an overarching umbrella company to simplify taxes and use the losses of one company to offset the profits of another.
- Working from a home office? You may be able to deduct expenses for the business use of your home if (a) you regularly use part of your home exclusively for conducting business, and (b) your home office is your principal place of business. Visit IRS.gov for additional rules and restrictions.
- Deduct taxes paid to other municipalities (local, state, foreign, etc.) that are attributable to your trade or business as business expenses.
- If you use a cellphone for business, you can deduct the business portion of your bill as an expense.
- Using the Section 179 deduction, you can recover part or all of the cost of qualifying property (e.g., office furniture), up to specified limits, rather than recovering the cost through depreciation which takes longer.
- You can deduct health insurance premiums, as long as the deduction doesn’t exceed your company’s net profit.
These are just a few of the ways you can reduce your tax liability. For additional suggestions, contact your accountant, give us a call at 206-386-5455 or send us an email. We would be happy to offer our expertise and insight, and to set up a complimentary consultation if you are ready to take that step.