2021 is starting off as a turbulent year. The challenges faced by businesses have been enormously frustrating, and unpredictable. The only constant which can be foreseen in these times, is that your taxes must be paid. As 2021 begins, a thorough review of the changes in taxes which the Federal and State governments require your business to pay is prudent. Considering an estimate of the amount which will be owed, and the approximate due date for filing your business income tax return, are all critical elements for your ever-fluctuating bottom line, and profitability.
Your business operates to flourish, profit, and grow exponentially, overtime. The IRS offers numerous deductions for businesses, to assist with reducing the amount of income tax, owed. To achieve financial profitably, it is necessary to spend money to generate greater income. The benefit which many entrepreneurs don’t realize is that the spend offers a two-fold gain.
Spend works to grow the company and can be deducted from your total taxable income at the end of the year. The following, additional 6 tax tips will allow your business to meet the proper IRS tax criteria for many deductions that might have been easily overlooked.
Business Tax Saving Tips:
- Hire a qualified account. Retain a certified public accountant who is knowledgeable. Do the research to find someone who has extensive tax preparation experience, to work with, and for you, in monitoring your cash flow, and gross, and net profits. This person will design an accurate tracking system for all business receipts, to substantiate every spend, and payment, throughout the year. Listen to this expert’s wise advice on contributing to a retirement fund, taking a bonus, updating your business plan, and stretching every dollar spent. Keep every receipt for at least four years.
- Calculate the standard mileage rates. When calculating a deduction for auto expenses, for business related driving usage, note that automobiles used for business can reap tax benefits which offer significant savings. Choose to use the mileage driven factor. Gasoline is very costly and is continuing to rise. You will realize a better return of expenses by charting every mile driven for business purposes. Check to make sure that your vehicle is properly insured. It is essential. Freeway Insurance offers excellent coverage and great rates. Mobile apps are an excellent tool for monitoring milage.
- Classify your business correctly. Classification of your business must be precise to avoid overpayment of taxes. You must choose this classification from either a C Corporation, S Corporation, Single Member LLC, Limited Liability Partnership, Sole Proprietorship, or other. Receiving the advice of an attorney, and a business consultant, and conferring with your accountant, will allow for the proper classification of your business. This business structuring affects not only how much tax must be paid, but also how much money can be raised, if needed, what paperwork must be filed with the government, and any personal liability you might incur.
- Capitalization Rules Can Be Rewarding: Did you happen to obtain a tangible item of value in 2021? Equipment that is needed for your business or property perchance? If so, it is vastly plausible that you could take a significant deduction on your tax returns. There are unique rules surrounding capitalization that your CPA can guide you through, but the tax benefits can be plentiful.
- Specifically claim every penny of income reported to the IRS. Noting that the IRS receives a copy of every 1099-MISC form that is submitted to you, the income which you report will be thoroughly reviewed, and must match the substantiated income these forms provide. Have your accountant double-check that the income from the 1099’s you have received, and are reporting to the IRS, match exactly. This is a crucial step in the income tax process. Accuracy is your best character reference, and business presence as an honorable and honest taxpayer.
- Internet and other Tech fees. Operating a full-service business, with numerous clients, often demands that you choose lighting quick and often costly internet access. The monthly fees vary and can spike. You may also require subscriptions for virus prevention, malware, and other software. These services are essential to keep your company up and running. Tracking these expenses, with receipts, and any accompanying paperwork, should qualify for a tax deduction.
The Bottom Line
If you team up with your accountant to keep thorough and extremely accurate records, monthly, this year, accompanied by every possible receipt for any expenditure, your tax forms will be accurate, and an audit will be avoided. Taking deductions is your right. It is an excellent tool for saving copious amount of hard-earned dollars. Just keep in mind that the deductions taken, must meet the extremely specific criteria which the IRS describes.