Small Business Owners: 3 Steps for Saving on Taxes

Small business owners know tax season is chaos.  And maintaining an efficient organization can become complicated and tedious. With the changing tax laws and the constant mission of tax savings, you can feel bogged down and lost. Here are a few strategies that you can use to help ease the process of dealing with tax season.

1)      Organized Accounting Methods

Many small business owners don’t keep a close eye on their accounting practices, leaving them vulnerable to income reporting errors. As a business owner, you need to look through your books and determine if there is a profit or a loss for the year and be honest with yourself.

Incorrectly categorizing things such as inventory or cost of goods sold can cause inaccurate revenue figures. By reconciling these early and often, you have time to catch mistakes and report the correct numbers for tax season.

If accounting and bookkeeping are not strengths of your organization, use a professional bookkeeper.  You’ll save time and we all know, time is money.

2)     Keep up to date with current tax legislation

Owners should look at current tax laws and upcoming laws to make business decisions. An example of this, IRC section 179 tax break allowing small businesses to write off $500,000 in equipment purchases is slated to reset to $25,000 in the New Year. Congress has generally extended the tax break in the past but this isn’t a guarantee, and could prove detrimental to owners. An owner looking to purchase new equipment may be more inclined to finalize their purchase before the end of 2013 and take advantage of the larger tax break.

3)     The Affordable Care Act

The Affordable Care Act is going to affect most businesses, for better or worse.  It is imperative that small business owners determine the effect of this legislation on their business. Most small businesses (50 or fewer employees) will not be required to provide insurance, but should be able to claim tax breaks if they do offer coverage (which has been available since 2010).  Reviewing the finer points of the Act is a must for businesses- nothing would be more harmful than not having full clarity on the Act’s effect before it occurs.

These are just a few things small business owners can keep in mind as they are heading into tax season. To recap, make sure you’re:

  • Keeping your books in order (review them before the end of the year)
  • Looking at legislation changes regularly (make sure you’re taking advantage of any and all tax laws)
  • Analyze the effect of the new Affordable Care Act on your business.

Doing your best to keep these points in mind should prove to help you make it through tax season with minimal brain damage. Thanks for reading, and best of luck with the 2014 Tax Season!