How to Save on Business Taxes in 2022 and Beyond
How to Save on Business Taxes in 2022 and Beyond
It’s that time of year again – tax season. If you have a small business, there may be tax loopholes that you were not aware of that can save you money this tax season!
There are ways to invest business profits to lessen your taxable income, tax avoidance strategies that can be used for small businesses, and ways to plan for future tax years. Tax planning is ultimately one of the best strategies. And should your small business need more help, check out our ebook, 20 Ways to Pay Less Tax, which includes 20 tips for tax season that will serve you year after year!
Ways to Save on Business Taxes
Whether your business is years old, or just a few months old, or somewhere in between, there are strategies you can use to lessen your taxable income and save money on what taxes you owe. You may have the option to deduct expenses paid for with PPP loans, take advantage of the new Tax Cuts and Jobs Act (TCJA), although, please note that this law has certain elements that will expire this year, or even reinvest some of your business’s earnings.
Did you know that you can earn a tax credit, just for keeping your staff employed? The Employee Retention Tax Credit (ERTC) can still be used for a maximum of $21,000, should your business meet the terms and conditions of this law. And if your business is brand new, you can even use this law as a start up credit!
If your business has been paying into family paid leave, specifically for your staff to take time off to receive their COVID 19 vaccination, your business can claim a deduction for this paid time off! Be sure to check with your accounting staff that your records of such leaves are documented properly to capitalize on this benefit.
If your business has taken out a PPP loan, you can even deduct expenses paid for with this loan. Just be sure that your payroll logs are immaculate – without the proper documentation, this deduction will be difficult to earn.
Let’s not forget the valuable methods of lessening your taxable income! If your business is a pass-through entity, or an S corporation, you may be able to subtract as much as 20% of your business income! Again, you must have careful and accurate records of the income and deductions that have been passed down to shareholders or other entities.
Using Employee Benefits to Reduce Taxable Income
Does your business provide retirement plans? Does your business provide its staff benefits? Do you provide accessibility for disabled employees or the public? All of these can be used to save money on your business taxes! Retirement plans (assuming they are qualified plans, recognized by the IRS) can be written off in most cases.
Investing in your staff is always a great idea, but simply increasing their pay will unfortunately only increase your and their tax obligations. A great way to give to your staff, without necessarily increasing their pay alone, is to invest further into their benefits. Your staff will save money, and your business will not have that looming, extra, taxation obligation. This can be done by investing in HSAs, investing in better healthcare, and as mentioned before, retirement options.
Section 179 of the IRC provides deductions for businesses who have purchased supplies for their business. These can be vehicles, software or other technology, computers, and even machinery. Please note that this law has a maximum deduction of $1,050,000, and the total amount of equipment purchased that can be deducted is $2,620,000 in the year 2021.
Stay Updated on Business Tax Laws
All of these strategies can help your small business, but ultimately, there will always be new laws and “hidden” benefits that can only be taken advantage of if your business and accounting staff are aware of them. Some tax experts say that it would take a lifetime of study to even begin to stay up to date on tax laws as they change, year to year.
It is absolutely crucial that you, as a business owner, watch the news and any updates to tax laws. There are new opportunities and new regulations every year, depending on the climate of the economy. Just in the past few years we have seen COVID 19 ravage our country, and therefore dozens of tax credits and new laws have popped up to keep businesses afloat. While the past few years have been a more extreme example, these laws do change each year, even without a deadly pandemic.
As a business owner, remember, your job is to keep the business running. You are not an attorney or a tax planner. Being sure to have the appropriate staff is absolutely essential! Businesses should not only have tax preparers, but tax planners as well.
As a business owner, your job is to keep your business as successful and lucrative as possible, for yourself, your staff, your shareholders, your partners, and other owners. This cannot be done if there are constant tax credits, loopholes, or other savings left on the table. Remember, it is absolutely essential to have the right people looking over your books, planning for the following tax year, and staying up to date on changes in tax law.
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