Five Tax Tips for Your Small Business

Five Tax Tips for Your Small Business

One of the many responsibilities for small business owners is having to pay taxes. Paying taxes is perhaps the worst part of being a business owner and if you get it wrong, you could end up owing a lot more money. The IRS can impose hefty fees and fines if they feel you've tried to skirt the laws, so it's important to know how to file, so you get the best return.

Depending on the tax structure of your business, these five tax tips for your small business may vary for your strategy. However, most of these tips are applicable to small business tax situations, regardless of their structure.

1. Ensure Your Business Takes Advantage of Qualified Business Income Deductions

Tax Cuts and Jobs Acts have been passed into law where the IRS will allow some business entities to deduct up to twenty percent of qualified business income, and twenty percent of qualified real estate investment trusts. These deductions can be significant savings when you take them in addition to your itemized deductions.

2. Benefits Versus Raises to Save on Employer Payroll Taxes

If you want to cut down your employer payroll taxes, you can consider an employee perk. The IRS has a list of what is taxable and what is not, and some benefits for your employees will relieve your payroll tax amounts, such as:

  • Providing up to $50,000 in life insurance coverage
  • Presenting tickets to music or sporting events occasionally
  • Providing employee meals
  • Providing employees with a company cell phone

Gift cards presented to employees are taxable under IRS laws, so if you want to present gifts for any occasion, make it a material one such as a fruit basket or any item to celebrate the event.

3. Remember Your Transportation Costs

Many small businesses forget to consider their transportation expenses when going through the tax process. This year you don't want to choose a straight expense deduction over your calculation of mileages until you've balanced them against each other. 

You may also have canceled airline purchases due to COVID-19 travel and meeting restrictions, or vehicle rental cancelations that have been refunded from 2020 that will need to be added back in as credits. If these purchases were not refundable, they are then losses you will want to factor into your deductions as well.

4. Defer Your Payroll Taxes

The CARES Act allows sole proprietors and small businesses leeway on their payroll taxes this year. This 6.2% share of your Social Security payable from March 7th, 2020 to December 31st, 2020 can be split into two payments if it makes sense to your business budget. You are able to pay half of the amount by December 31st, 2021, and the remaining half on December 31st, 2022. This split is not beneficial to every business, talk to the experts at ETaxBreaks to learn if this will be an advantage for your situation.

5. Section 179- Deductions for Tangible Personal Property

Section 179 of the IRS tax code defines a deduction that applies to tangible personal property, such as the equipment and machinery you've purchased for your business or trade. If you should choose, it can also be applied to qualified real property. The definition of qualified real property means any improvement to a nonresidential property, such as alarm system installations, air-conditioning the property, fire protection installed, improving heating and ventilation systems, or repairing a roof. The expense deduction under Section 179 has increased from $500,000 to $1 million.

Where to Learn More Tax Tips for Small Businesses

ETaxBreaks is here for your business to ensure you get back what you're owed. Through proficiency and integrity, we are proven industry experts who can ensure you receive all beneficial tax incentives owed to your business. Talk to our tax credit specialists today and learn how we can find the maximum incentives to help your business get what you deserve.