Setting up and funding a retirement plan for yourself and employees can save you money on taxes, and it's easier than you might think. Just make sure it's a qualified plan (qualified by the IRS, that is), so you can take advantage of those tax savings.
Melissa Phipps at Retirement Focus has some suggestions for some retirement plan options for self-employed business owners.
Tax credits are the federal government's way of encouraging businesses and individuals to do things (or not do things). This article lists lots of tax credits your business can use to reduce income.
For example, you can take tax credits for hiring employees, doing research, "going green," providing access to disabled employees and the public, and providing health coverage for employees.
Businesses have the opportunity each year to accelerate depreciation on purchases of business equipment and vehicles. Depreciation benefits your business by giving you more deductions for expenses for purchasing business assets.
The two most common types of accelerated depreciation are Section 179 deductions and bonus depreciation.
Section 179 deductions allow you to immediately take costs of buying assets
And bonus depreciation is an extra benefit for buying new assets.
Both depreciation programs have been increased, so it's a good time to talk to your tax preparer if you have purchased major assets.
You may be able to deduct part of the cost of giving gifts to employees, customers, and vendors. In addition, you may deduct awards and bonuses to employees.
All of these deductions have restrictions and limits so read carefully and consult your tax advisor before making any decisions. You also need to know the tax implications of these benefits to employees.
Bonuses to business owners may also be deductible. Check with your tax professional.
Before the end of each year, review your current expenses and, if you think you can benefit from reduced income, prepay some of those amounts.
You can also increase expenses (and decrease income) by stocking up on supplies.
Another way to cut taxes is to write off obsolete equipment and inventory that has lost its value. These write-offs reduce your cost of goods sold and can decrease your net income.
Timing income is a method of moving income from one year to another. You first have to determine which year will have the highest taxes, because of two factors (1) your business income, (2) business tax rates. So get out your crystal ball and talk to your tax advisor about this one.
Timing expenses works the same way as timing income, only in reverse. Put the expenses in the year of higher taxes, to reduce your net income in that year.
Before making any decisions that can affect your business tax return or spending money to save on taxes, consult your tax advisor or tax preparer.
The information in this article and on this site is intended as general information for discussion purposes. It is not intended to be tax or legal advice. Every business situation is different, tax laws are complex, and laws and regulations change.
10 Ways to Save on Business Taxes
Tax Deductions and Credits You Can Use to Reduce Taxes
Want to save money on your business tax bill? While I can't guarantee you a refund, I can tell you that these are the top tips across the board. Some - like timing income and expenses - must be done before the end of the year. But others, like funding a retirement plan, can be done any time before you file your tax return.
Disclaimer: These tips are not intended to be tax advice, but only to give you some tax-saving ideas to discuss with your tax professional. Every business is unique, and tax laws change frequently.