Accounting is the backbone for tax planning, compliance, and reporting. Accounting and taxation have a complex relationship necessary for taxpayers. This relationship guarantees compliance with tax laws and helps optimize tax liabilities. A tax accountant in Tulsa is familiar with the role of accounting in taxation and can manage taxes for individuals and businesses. They can implement tax strategies to maximize tax savings and reduce liabilities.
If you are like most taxpayers, you probably find tax season as a stressful part of owning and running a small business. However, smart tax planning can create a solid foundation for success in business. By managing your taxes effectively, you can save money, stay compliant with tax laws, regulations, and requirements, and pay the way for growth. As a small business owner, below are strategies you can use to make this happen:
Pick the Right Business Structure
The structure of your business can significantly affect your taxes. Every option comes with various tax implications you must understand. Consider consulting with a tax expert to help determine the right structure for your business and its tax implications. Business structures include the following:
- Sole proprietorships. The income of a sole proprietorship is reported on the owner’s personal tax return. When tax time arrives, a Schedule C form should be filed to report business profits and losses. Also, a Schedule F form must be filed to report Medicare and Social Security taxes. As a sole proprietor, you take care of taxes, legal problems, and debts on your own.
- Partnerships. As pass-through entities, partnerships do not pay income taxes. Individual partners must report business profits and losses. Every partner must report their shares on their returns.
- Limited liability companies (LLCs). Because LLCs are separate legal entities, they have some flexibility during tax filing. LLCs can file as a sole proprietorship, a partnership, an S corporation, or a C corporation, depending on how they choose to be taxed. S corporations and C corporations can provide tax benefits for some businesses; however, tax filings for these business structures can be complex.
Maximize Tax Deductions
Tax deductions minimize your taxable business income. Identifying and documenting deductions can help you save money. To reduce your deductions, monitor your business expenses carefully. Stay organized and stay on top of changing tax laws. Also, consult with a tax expert to help maximize your deductions. Business deductions include home office deductions, education expenses, internet and phone expenses, professional fees, and travel and entertainment.
Determine If You are Eligible for Tax Credits
Unlike tax deductions that minimize your taxable income, credits directly decrease the tax amount you owe. Examples of tax credits you can leverage include work opportunity tax credits, small employer health insurance credits, and clean energy credits.
Establishing or Contribution to a Retirement Plan
Below are ways retirement plans can help you save tax money:
- Personal taxable income. Traditional 401(k) contributions can be subtracted from your taxable income, lowering your tax liabilities.
- Payroll taxes. Matching retirement plan contributions do not require paying payroll taxes on the employer’s contribution.
- Corporate tax bill. Your tax bill can be reduced by deducting tax-deductible employer contributions and certain fees to the retirement plan organization from it.
Write off equipment and real estate purchases. The cost of some kinds of equipment and property can be written off over several years through depreciation deductions. Such a kind of deduction can offer tax savings.
Hire a Tax Advisor
Because tax strategies are complex and tax laws tend to change constantly, you need expert guidance and advice. A professional tax advisor can guide you through the legal process and help avoid making poor tax-related decisions. They can educate you about strategies to lower your tax burden.
