TOP 16 Business Tax Saving tips for 2019

Tax season is one of the most stressful times of the year for many small business owners. This is largely because we tend to wait until the last minute instead of preparing our taxes throughout the year. Reduce your stress by implementing the top business tax saving tips we share on tax prep, tax deductions and filing your tax return.

One of the ways that you can save money on your taxes is by using ”Quickbooks Online”, our recommended accounting software for small businesses. QuickBooks can help you keep track of your income & expenses so that tax time is a breeze. Call Tax Shack at 818-365-1040 to learn more.

Here are the top 19 business tax saving tips to help you during tax time:

1. Use Payroll Tax Software to Avoid Costly IRS Penalties
Did you know that approximately one-third of all companies get fined every year for incorrectly handling payroll taxes? This is due in large part to the fact that around 40% of businesses with employees try to handle payroll on their own, using paper or spreadsheets without the assistance of a third party.

Don’t get caught in this trap, use Tax Shack for all your payroll handling needs. We will automatically calculate, deposit, and file your payroll taxes for you – and our personalized customer support means that help is easy to find when you need it. Call Tax Shack at 818-365-1040 to learn more.


2. Keep Business and Personal Finances Separate
A common mistake of small business owners is to commingle business and personal funds. It’s important to have a separate business checking and credit card accounts for your business. This will make things a lot easier when it comes to managing your books and getting deductions organized for tax time. If you are ever audited by the IRS, you want to make sure that you can produce documents that support legitimate business expenses. Call Tax Shack at 818-365-1040 to learn more.


3. Get Organized with a Filing System
One of the primary reasons people dread tax time is because they are not prepared, often times causing them to pay more in fines or claim fewer deductions. By implementing just a few things into your daily, weekly, or monthly routine you can remove the stress that tax season can bring on and also save money. Here are a couple of recommendations to get you started:
Set up a Filing System to Keep your Paperwork in One Place
Purchase a dozen expandable folders so that you have one for each month. Label each folder with one of the 12 months and file all receipts, deposit slips, ATM withdrawal slips, etc. into their respective folders.
Block out a Couple Hours Each Month on Your Calendar
If it isn’t on your calendar, it most likely will not get done. However, if you set aside just a few hours each month to organize all of the paperwork in the folder, you won’t have to do 12 months at once. During this time, you want to reconcile your bank and credit card accounts by matching up your receipts with the statements received from your bank.

Call Tax Shack at 818-365-1040 to learn more.


4. Use Accounting Software like QuickBooks Online to Track Revenue and Expenses
Accounting software can make tax time easy and can help you claim all your deductions. Once you have updated the program with all of your business revenue and expenses, you can quickly create financial statements in just a few minutes to send to your CPA or tax professional so they can file your tax return. If you use QuickBooks Online, you can set your tax preparer up with a user id and password so that they can access QuickBooks and run reports instead of you having to do it.

If you don’t have the time to input data and manage accounting software, let a virtual bookkeeper do it for you. Tax Shack offers affordable help with cash flow management, monthly financial statements, and more.
Call Tax Shack at 818-365-1040 to learn more.

5. Take the Section 179 Deduction
The section 179 deduction allows you to recover the full cost of equipment or property up to $500,000 first or the 2017 tax year ($1 million for the 2018 tax year) that you purchased for your business in the same year that you purchased it. This beats recovering the cost over a period of time – like 5 or 10 years – through depreciation deductions. Call Tax Shack at 818-365-1040 to learn more.


6. Consider Setting up a Retirement Plan
A retirement plan can provide several tax benefits for you, your business, and your employees. Below are just a few of the benefits:
Employer contributions are tax-deductible
Assets in the plan grow tax-free
You are able to attract and retain better employees
Call Tax Shack at 818-365-1040 to learn more.


7. Choose the Right Business Structure
How your business is structured can have a significant impact on the taxes that you pay. For example, LLCs are pass through entities which means that your profits will be taxed at your ordinary tax rate, while shareholders of a C corp are taxed at the corporate rate and then again when they report distributions on their tax returns, this is known as double taxation.

To learn more about the types of business structures and how to choose one that saves you the most money at tax time….Call Tax Shack at 818-365-1040 to learn more.


8. File Your Taxes on Time
Do your best to file your tax return on time. If you fail to file your tax return on time and pay any taxes that are owed (in addition to interest), you will be assessed the following penalties:
Failure to file on time – The minimum penalty for certain tax returns filed 60 days late or more is $205. If you owe less than $205 then the penalty is 100% of the unpaid tax. Otherwise, the penalty can be as much as 5% of your unpaid taxes each month up to a maximum of 25%.
Failure to pay on time – This is based on the amount of tax you owe, and it will continue to accrue until the tax bill is paid in full.
If you are able to file your tax return on time but you do not have the money to pay your tax bill, go ahead and file the return. By filing the return, you can at least avoid the failure to file a tax return penalty. There are several penalties that may be eligible for relief. There is a way to appeal a penalty using an online tool. You can find more info here with the IRS.

Call Tax Shack at 818-365-1040 to learn more.


9. Take Responsibility for Your Return
If you do hire a CPA or tax professional to prepare your tax return, have them go over the return with you. Make sure that you understand and agree with the information they are reporting and take responsibility for the income and deductions you claim. Your signature at the bottom return means that you agreed 100% with what is being reported about your business. At the end of the day, the IRS will hold you (not the tax preparer) responsible.

Call Tax Shack at 818-365-1040 to learn more.


10. Keep Good Accounting Records
Keep good records during the year so at the end of the year, you can make informed tax management decisions that reduce your tax liability. To make sure your financial information is correct, reconcile all your bank and credit cards each month. When done, make sure you don’t have any uncleared items or undeposited funds.

Call Tax Shack at 818-365-1040 to learn more.


11. Donate Unused Inventory
If you have unsold or unused inventory, donate it and get the tax deductions instead of spending cash to store it. Company donations of money, supplies, and property are all considered deductible expenses. However, be aware that donations of goods greater than $500 have stricter reporting rules.

Call Tax Shack at 818-365-1040 to learn more.


12. Forecast Your Business Cash Flow
Build a cash flow forecast to estimate your tax impact and prepare for your payments as well as your deductions. Modeling out the flow of your receivables and payables alongside your budget and sales pipeline will not only help you at tax time but forecasting all of those key factors in your cash flow will help you thrive and grow your business year over year.

Call Tax Shack at 818-365-1040 to learn more.


13. Pay Estimated Taxes
Make sure enough estimated taxes are paid throughout the year to avoid interest and penalties. Many sole proprietors came from W-2 jobs and have a very difficult time remitting quarterly taxes. They are used to spending their entire paycheck, not understanding that the money they get when they are self-employed is not all their money – it includes their tax money too. As a result, many small business owners are unable to pay their tax bills because they didn’t budget properly and are hit with interest and penalties, becoming a vicious cycle.

Call Tax Shack at 818-365-1040 to learn more.


14. Understand How the New Tax Bill Affects your Small Business
The new corporate tax rate structure, which features a top rate of 35%, is replaced with a flat 21% rate. This is the hallmark of this bill. Under the new law, pass-through entities – such as partnerships, S corporations, limited liability companies (LLCs) and sole proprietors – can claim a 20% deduction on earnings, subject to special rules restrictions. The deduction is not available to higher-income personal service providers.

Call Tax Shack at 818-365-1040 to learn more.


15. Don’t Forget About Start-Up Costs
Small businesses are often not aware that any expenses that are incurred before the first sale are called “start-up costs”. These costs cannot be deducted until the first sale but can be deducted over 15 years. Plus, you can elect to deduct the first $5,000 in the first year of business. Many small businesses assume they can deduct all their costs in starting a new business but they cannot until they have their first sale.

Call Tax Shack at 818-365-1040 to learn more.


16. Take the Office Deduction
Having a home office is something we often see missed. Many Small Business Owners don’t even realize that having a home office exclusively used for activities related to the business makes them eligible for a deduction, and as a result, fail to tell their accountant. Call Tax Shack at 818-365-1040 to learn more.