4 Tax Tips Every Small Business Owner Needs to Know

Published by William T. Fricke at November 4, 2021

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Managing your tax liability as a small business can be challenging. The work for a small business owner can seem never ending, which leaves little extra time for handling tax issues. Fricke & Associates, LLC, can partner with your business to help you with your tax returns and tax planning. Ideally, tax planning should be a year-long endeavor, making wise choices to put your business in the best position when tax season comes. Our team of professionals compiled a list of our best tips for small businesses wanting to improve their tax situation.

·        Choose the Best Employees and Vendors—When you make wise choices for your employees, you will likely have a lower turnover rate. The cost of hiring a new employee is far higher than the cost of keeping a good one because of the expenses necessary for recruitment and training as well as the tax implications. If you have found a quality team of employees, keeping them happy will be beneficial for everyone. Reliable vendors can be trusted to bill regularly and provide detailed invoices, which will be essential when you are looking to write them off as legitimate business expenses.

·        Know Deductions and Credits—There are many opportunities for reducing your tax burden through utilizing deductions and credits appropriately. There are many business expenses you may be able to take deductions for that you are not already. Your business may qualify for credits based upon your earnings or the benefits you are providing for your employees, such as childcare or retirement funding. Be aware of your deductions related to entertainment and meals because there are limitations on how much you can deduct, usually less than 50%. One of our tax planning professionals can guide you to the deductions and credits you will qualify for. Maximizing your deductions and credits ensures that your business is not overpaying in taxes and remains as profitable as possible.

·        Stay on Top of Capital Expenses—Most business owners are aware of the adage, “You have to spend money to make money.” Although there are some necessary expenses to run a business, capital expenses should be accrued carefully. Make sure that you keep clear records of purchases you make that fall under capital expenses, such as improvements to your space, equipment, furniture, etc. Also, think carefully before making unnecessary purchases. The longevity of your business hinges on your ability to follow a budget, invest your money wisely, and avoid frivolous spending.

·        Plan to Use a Good Accounting System—Your accounting system should be more than a pen and a paper ledger at this point. There are many accounting programs available to help you keep track of your finances. The right accounting system will help you keep your accounting on track year-round, so you will have all the proper documentation for filing your taxes easily accessible. Our team is well-versed in the latest technology available for managing accounts. We can offer support in everything from creating a budget to documenting payroll to troubleshooting technical questions with your accounting software. There are even options you can manage from your smartphone that will send you notifications to help keep your accounts on track. If you are interested in recommendations to suit your small business, reach out to Fricke & Associates, LLC.

Knowing how to manage your taxes properly will help you avoid overpaying when tax season rolls around. Our team at Fricke & Associates, LLC, can provide support with your tax return and tax planning, ensuring the best outcome for your small business.

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