As the tax year draws to a close, a small business should be getting ready for tax season. Businesses are heavily taxed by all levels of government, including city, county, state and the Federal government. To lower your anticipated tax burden, consult with a good accountant to see what last minute moves you should make for your particular situation. In the meantime, there are several things you can consider to get ready to lower your business’s taxes.
Lower Your Business Taxes by Making Donations
If your business has old computers, equipment or outdated inventory, you can donate it to a local charity. You can donate a car to a worthy charity, or if you have a stack of t-shirts that were never used as promotional items consider passing them on to those in need. The fair market values of the items are deductible as are any expenses you incurred in giving the item to the charity. For example, if you pay someone to tow a car to the donation center, the cost of the tow truck is deductible if you are not reimbursed for it. Be sure to get receipts for the fair market value from the charity.
Donations may be limited for some business so be sure to contact an accountant about your particular situation.
Lower Your Business Taxes by Paying Outstanding Taxes
Another good idea is to pay off any outstanding taxes you may owe so that you can make the deduction on your income taxes. This includes property taxes and state income taxes. If these amounts are paid by December 31 you will be able to claim them on your income taxes when you file next year. You may also want to consider running your final payroll of the year so that you can pay your employee taxes by December 31.
Lower Your Business Taxes by Lowering Your Inventory
Invest in equipment rather than inventory at the end of the business’s tax year. The equipment can be expensed if you are under the limits for Section 179 Expenses. High inventory shows up as an asset and is considered part of your income whereas a lower inventory from last year’s taxes will show as a loss that is deductible.
If you are in the black and looking for tax deductions, congratulations, you have earned it. In this economy that is truly saying something about your business acumen.
What is the Difference Between a 1099 and a W-2
Four Reasons You Should File Your Income Taxes, Even If You Don’t Have to