The last quarter of each calendar year is the time for strategic tax planning to reduce your small business’s tax bills. Ideally, tax planning should not be a once-a-year activity. Although you may be able to delay filing your 2022 taxes until late 2023 if you file an extension, there are many tax planning strategies that can reduce your total tax liability that need to be implemented before the current year ends. Here are some.
Review Your Net Income for the Year
Is there a noticeable increase in your earnings? Have rising prices eaten into your profits? A significant shift in your income, either up or down, can completely alter your tax strategy for the year. Your income level should determine how aggressively you pursue tax credits and deductions. However, if your income drops, you might qualify for tax credits you weren’t previously aware of.
Leverage Your Business Retirement Plan
For small business owners, establishing and fully funding a retirement plan is one of the best ways to reduce their tax liability. This could be a SEP IRA, a Solo 401(k), a Cash Balance Pension Plan, or some combination of the three. Which would you rather do: make a sizable payment to the Internal Revenue Service, or put that money into a retirement account? Profits in the hundreds of thousands of dollars per year may be deferred by high-income small businesses.
Check Whether You Qualify for the Home Office Deduction
There has been a recent trend toward full-time telecommuting for business owners of small enterprises. Home-based business owners who are also reading this article might be able to claim a tax break for their home office.
This valuable tax break can save hundreds, or even thousands, of dollars in taxes each year. The good news is that you will pay these costs for housing whether or not you use them for business. Don’t assume you don’t qualify for the home office deduction; verify that with your tax preparer.
Let Us Help You Sort Out Your Tax Deductions Before the Year Ends
With our tax services, you can maximize your income and reduce your taxes. Let our CPA in Orland Park, IL, review your finances for the best results. Get in touch with us or book a consultation to get started.
