When you are running a small business, it feels like you are the manager of all the responsibilities that come in front of you. These responsibilities include formulating marketing strategies, chalking out payroll, product, and services development, tracking accounts payable services, and most importantly managing taxes.
Small businesses generally work with a limited working capital which makes the aspect of tax saving even more critical. After all, it takes time to grow any business. Minimizing the risks of losing money and maximizing revenue is the name of the game. Once your business starts to grow it becomes important to manage your saved money to invest it in the right place to gain favorable results at the right time.
If you are in charge of a small business and have little or no knowledge of the tax system, it’s your time to seek help from outsourced accounting services.
While certain factors affecting your net worth are not under your control, there are still a few factors that can help you in lowering the tax burden. You can follow these 7 tax saving tips for your business.
1. Take benefit of accountable plans
Accountable plans allow workers to reduce their business expenses to an extent. In tax season 2023 you can enter these expenses so your workers can subtract them afterward. It will lower your total tax amount. However, there are certain rules to keep in mind, like, expenses should be incurred for a business purpose only at a reasonable moment and the funds that are not used should be returned to the worker within a limited time.
2.Make payment by cheque
When you are paying municipal taxes by cash, there are high chances of you losing the receipt. So, using a cheque can be a perfect idea as you will have a clear-cut idea about the payment in your chequebook. Even if you lost the receipt, you can find its history in your bank account instead of going through the accounts receivable process.
3.Use tax preparation and filing software
For a business owner, tax preparation and filing software can be a great option. It will inform you about tax laws and rules. You will be able to understand the situations and can grab the opportunity at your limits. It’s the most cost-effective way of completing tax preparation.
4.Take benefit of Section 179
The section 179 deduction allows businesses to reduce the complete purchase cost of qualifying assets endorsed during the tax year, so it’s helpful for businesses to purchase new equipment or tools. Moreover, the deductions from your income will increase the value of equipment or investment by decreasing the overall tax cost.
5.Contribute to multiple schemes
Under Section 80C of the Income Tax Act, small business owners can get multiple deductions on taxes up to Rs. 150,000. So, it’s a great plan to contribute to different kinds of schemes like life insurance and medical insurance, etc.
6.Avoid penalties for late payments
Outsourced bookkeeping can help you to keep your documents in one particular place in a manageable manner that will help you to pay without delays and save you from penalties. Short-term working capital and business tax debt loans can support you in covering tax payments and saving from late payments.
For small businesses, depreciation deduction can be the best tax-saving technique. Under the Income Tax Act sections, they offer small businesses a tax deduction on machinery for manufacturing firms. Not only this, small business owners can claim additional depreciation of 20% for new machinery purchased with the standard depreciation rate of 15% in the same year when machinery is installed.
Every year, new tax laws come up, and the government is trying to make the tax procedures simple and understandable for businesses. That’s why tax law changes are unpredictable and can create a huge impact on your business.
Speaking with an accounting expert is significant for small businesses. They will help you to understand better about tax issues and changes. You can visit Outsourced Bookkeeping, they have experts who are determined to help your business grow by taking care of bookkeeping accounting for you. Be sure to seek help from expert professionals to learn more about this concept.