As an entrepreneur, there is nothing more important than preserving your operating capital. Paying money toward expenses can put your business out of business before it has gotten a chance to get off the ground. For a business owner, one of the major expenses faced are the payment of taxes. In some cases, taxes can eat up to 30% of your business’s revenue; that can pose a threat to your business’s financial stability.

 

We offer these tax saving strategies to small business owners in Arizona.   

 

1. Use tax write-offs and deductions to your advantage: In the business world the term “write off” is bandied about quite often. Do you understand what it means? A tax deduction – aka business write-off – is an expense that reduces the total taxable income of your company. If the business earns $50,000 and has $10,000 in expenses (write-offs) the total taxable business income is $40,000. You could reap significant savings because of write-offs. Business expenses may include bad debt accounts, office rent, advertising, professional services such as accounting and legal and more. Office furniture and large items like computers can be written off and depreciated over time. No matter the industry it is best to keep all receipts and consult a tax professional before filing taxes. 
2. What’s your corporate structure? When you went into business, you should have filed articles of incorporation and should have selected your corporate tax structure. Corporate structures include Sole Proprietorship, Partnership, Limited Liability Company (LLC), C-Corp and S-Corp. Consult a business accounting professional to determine the best structure for your business. Each structure offers extremely different tax consequences and benefits. 
3. Plan now for retirement: Setting aside money for retirement just makes good fiscal sense and it can also help your business. A contribution to an IRS-approved retirement account can count as a business write-off reducing total taxable business income. All business partners/founders should open an Independent Retirement Account (IRA). Total up the annual contributions to deduct from taxes.  
4. Investing for your business’ benefit: You certainly want to set up a savings account for your business as a cushion. Why not put some of your savings to work for you, through low-risk investments such as mutual funds or T-bills. Why?  If you had to pay the IRS $20,000 in taxes, but invested that money and earned $8,000 in interest, you only lost $12,000.   
5. Make a plan for saving: Once you’ve determined your corporate tax structure ask your accounting professional to help develop a savings plan for the business.  Regular and consistent contributions are a great way to avoid a big tax bill at year end regardless of tax write-offs or projected revenue.

 

Did you know the IRS now accepts credit card payments for tax obligations for business taxes? This can be a good news/bad news scenario. Using a credit card for your tax obligations can preserve your operating capital.  Be sure not to get over your head in credit card debt for your business.

 

When it comes to addressing potential tax issues and tax write offs for your business, it’s always best to consult with an accounting professional who knows the ins and outs of small business accounting in Arizona.

 

Related articles

• The Home Office Deduction (turbotax.intuit.com)
• 12 of the Most Foolish Tax Write-Offs Ever Attempted (turbotax.intuit.com)
• Tax Topics for Freelancers, Contractors and Consultants (turbotax.intuit.com)