Its tax season 2022 and every small business we know is already businesses are planning its tax strategy and pulling up the necessary documentation to lower the tax liabilities. If you are a business owner doing neither then you are actively losing out on handy tax-saving opportunities.
Though the filings may be delayed until early 2022, tax planning must be resumed as early as 2022 to smoothly lower the tax burden. So right tax expertise is necessary at this point if you aim for tax savings. However most small business owners resort to DIY-route for filing taxes and this may work when you plan your taxes early, leverage the right tax tips and perform the right documentation.
If you can take care of 1 and 3, our accounting experts at Back Office Accountants can help you with two: the right tax tips for tax savings in 2022 today. Here you go:
4 End-of-Year Tax Tips for Small Businesses in the US:
Right business structure can help you save taxes: Most businesses start with a simple and convenient business structure which over time may impede their potential to save on taxes. Because tax payments are closely related to how you register your business, unknowingly you may have been ignoring an opportunity to save money.
Sole proprietorship, S corporation, limited liability company (LLC), and C Corporation are some of the common business structures. And each of these has different tax implications to adhere to. In the majority of cases at Back Office Accountants, structure/business entity is the first thing we correct and this has made a lot of difference in the bottom line. So you may be leaving an excess of your hard-earned money to taxes by not choosing the right business structure. We advise you to contact the right tax professional to make necessary amends as soon as possible.
A retirement plan can slash your taxes: It is surprising how most business owners forget the power of a smart retirement plan in helping them slash their taxes. It could be a SEP IRA or a blend of 401(k) and cash balance pension plan, these retirement plans offer a way out of high taxes. For example, self-employed can contribute as much as 20% of earnings towards SEP IRA, $61k being the maximum limit. While Solo 401(k) offers a large tax contribution, a cash balance plan combined with 401(k) can further ramp up the tax savings. All you need is to choose the right retirement plan as early as possible.
Claim First-year bonus depreciation: The Tax Cuts and Jobs Act (TCJA) has presented a gift to business owners by offering to claim 100% depreciation for the first year. This applies to the new and used properties purchased between September 27, 2017, and before January 1, 2023. In short, you will be able to get a 100% tax break on the entire cost of these purchases.
These properties may include vehicles, equipment, furniture and fixtures, machinery, computer software, property used for both business and personal use, qualified television or film productions and qualified live theatrical productions.
Point to note: This 100% tax break is being phased down after 2022. Post 2023, the percentage is going to progressively decrease. So we advise you to do the ‘needful’ to claim the tax break.
Deductions for small business owners & start-up founders: Remote working has enabled business owners to set up a home office. Fortunately, now they can claim home office deductions to make tax savings. Start-ups can take advantage of tax deductions available to save tax money too. Especially the long list of rolling costs you incurred to set up your start-ups may well be useful now to claim these deductions.
Today IRS allows start-ups to deduct up to $5,000 as a part of Startup setup and organization costs if they are less than $50,000. But remember that the deduction may well be reduced if they exceed the mark and are eliminated if they cross$55k. So another reason to document all your expenses and manage them if necessary is to claim the deductions. So consult with the right tax professional to know the details and take the necessary steps to prepare the documentation.
All the above 4 are a few low-hanging fruits that can be easily bagged by business owners with the right planning. That said there are ample tax-saving opportunities small, medium and large business owners can leverage to improve their bottom line provided they got their bookkeeping right. If you are a business owner looking for the right accounting help to improve your booking or tax expertise to unlock more tax-saving opportunities, Back Office Accountants can help you.
Being one of the best remote accounting firms in the business we have been providing full-service back office accounting services and tax consulting service that saves thousands of tax dollars for business small, medium and large. You can contact us here: https://www.backofficeaccountants.com/