Whether you’re just starting or a seasoned veteran, tax season makes every business owner shudder a little bit. But we can help! We’ve compiled ten of our best tips for saving your small business money on taxes. And if that’s not enough, we’ve even included a bonus tip at the end that’ll show you how to save money without any extra effort. So here are our ten tax saving tips for small businesses:
Do a detailed assessment of your business.
You need to know your business finances, tax obligations and tax breaks. The more you know about your business, the more you can save.
Do a detailed assessment of your small business’s finances by reviewing its invoices, receipts and bank statements for at least three months. This thorough assessment will give you how much money has been coming in and going out of the company. If something comes up later on down the track when applying for a loan or other funding assistance, then it’s not too late because those records would be there already!
Know what taxes apply to businesses like yours (or which ones don’t use). If a particular type does not apply, then make sure these are taken into account when deciding what steps should be taken next concerning any disputes or disagreements between parties involved. These could be quite costly indeed, so think carefully before deciding whether or not something is worth pursuing further into court proceedings, etc.
Take advantage of deductions on business equipment purchases
The first step to reducing your tax burden is to start with the basics: deductions. By taking advantage of all the deductions you are eligible for, you can lower your taxable income and reduce your overall tax bill. The following list includes some standard items that may be deductible on your business taxes:
- Deductible mileage for business vehicles
- Property depreciation on office buildings, furniture, and equipment
- Business supplies purchased for use in the office
Record and document all your transactions
It’s important to keep good records of all the transactions in your business, so you can be prepared if you ever need to file a tax return. It would help if you kept receipts for any purchases made on behalf of your business (including travel costs, meals and entertainment expenses) and bills paid by the company. You should also keep accurate records of your income and expenses. This will help ensure that you don’t forget anything when it comes time to file taxes.
Capital allowance incentives
Did you know KRA provides an incentive called Capital Allowance to a maximum of 100%? Well, now you do.
Rates of capital allowance will vary depending on whether it’s buildings, Machinery or formworks, with the first year of purchase starting from 10% to 50%.
For example, if you bought a manufacturing machine for your business at 10million, 5million (50%) would be a deductible allowance in your first year. How about that.
Don’t lose money; contact MA Financial Consultants for guidance on such savings on your capital expenditures.
Hire a Reputable CPA
Before filling out your returns, contact a professional CPA such as MA Financial Consultants. You may qualify for health savings or write off a qualifying child care expense. An experienced CPA will have a built-in strategy to get your taxes done right regardless of your financial situation. In addition to ensuring you’re paying everything due, there are many write-offs you may not be aware of that could lower your tax bill. Remember, CPAs don’t cost you money; they save you money.
Deduct Travel Expenses
If you frequently travel for business, you can have some of your expenses fully deducted from your business taxes. You shouldn’t mix personal and business travel, but you can claim personal travel for a business purpose if you do. And if you’re a frequent flier, even when your flights are entirely professional, you can later redeem any miles that you earn with a business flight for personal use.
Don’t Buy Anything Just Because It’s Tax-Deductible.
This tip might sound counterintuitive; after all, isn’t the point of buying things that they’re tax-deductible? Well, yes and no. While it’s true that any purchase made by your business is generally eligible for a deduction, that doesn’t mean that every purchase needs one! If you bought something just because it’s deductible, you may overpay for something that could have been purchased more cheaply elsewhere. Always make sure that you’re getting the best price possible when buying items for your business; better yet, don’t buy a thing if you don’t need it in your business.
Know the rules on entertainment deductions
You can deduct the cost of entertaining clients, customers and employees as long as:
- The main purpose of the entertainment is business.
- You meet with your employee or client for business purposes during the entertainment event.
- The entertainment is directly related to your business. For example, if you’re hosting a high-end dinner party at a restaurant where a famous chef will be making his signature dish before guests, this would qualify as an entertainment deduction because it’s directly related to your business (you’re hosting an exclusive event).
Make charitable donations
If you make charitable donations, those contributions could be deducted from your taxable income. It’s important to note that all donations must be made by December 31st of each year and that they must be made directly to a registered non-profit organization in order to be eligible for deduction.
Account for Business Losses
It’s important to understand that business losses count against taxable income. If your deductible expenses are greater than your income, you can claim a tax deduction for the full amount of your loss. You may want to consult a professional accountant before claiming a loss since, in some cases, there may be limitations to how much of a particular item can be written off.
That’s it! Now you have the tools to avoid making errors and omissions on your small business tax returns.
But remember, this is only a list of quick tips. Understanding your business’s financial health and how you can maximize your profits and minimize your losses depends on having someone you can talk to. That could be an accountant or a tax expert who understands the ins and outs of small businesses like yours, someone who knows how they work, what they need, and what they should do to survive. When it comes down to it, these are just some suggestions for avoiding mistakes; if you want long-term success with your business taxes, find someone who can help guide you in the right direction.