When you are running a business, money is always a big issue and the handling of your finances is one of the most important tasks of all. Alongside handling your budgets and payroll you will also have to pay tax, and this is where things can become a little confusing and frustrating.
Tax is hard enough to understand sometimes in your personal life, and when it comes to your business it can be even more confusing which is why many people opt to use VAT and sales tax financing solutions. If you are struggling with the tax on your business this year, here are some of our tips to make it easier.
One easy way to save some money in taxes for each year is to bunch your deductions into one calendar year rather than have them spread it. This can include things like charitable giving and having these things bunches up in one year can save you a lot of money when tax time comes around.
Maximise retirement contributions
This is something for employees to think about and it can make a big difference to The tax which is taken away from you every month with your payslip. If you have a retirement or pension plan in your company then you can try to contribute as much money as possible to it and this will greatly help you when it comes to tax being deducted from your account. Because if you put more money into your pension or retirement and plan you have less taxable income leftover.
Minimum Distributions (RMDs)
If you are an older worker looking to retire and you are over 70, you will want to take your minimum distributions right now to avoid having to pay a lot of tax on it. This is because the IRS will try to take the tax which has been owed all these years when your pension comes out so you need to be smart and beat them to it to protect your money.
When you pay tax at the end of the year as a business you will have to also pay taxes on any investments you have made which have caused a gain in your profits. However if you want to make sure you don’t lose out on too much money you can sell off low performers and this will give you a loss in your profit and will allow you to pay less tax as a result. It can be a handy trick when you want to make as much money as you can and it can truly make an impact in your business.
Annual exclusion gifts
If you want to look after your family and make sure that they are well off during their lifetime you’ll likely give them money now and again or perhaps place money into a trust for your kids as they grow older. Gift tax is a type of tax which charges you tax on any money which you gift that reaches over a certain threshold. This means that if you want to be exempt from this you will need to make sure that you gift underneath the threshold.
Give to Charity
As we have discussed a little bit earlier, if you are a business you can get some help with your taxes by giving money to charity. You can either donate money or you can also donate things like food and clothes too. If you give a decent sim to charity it will reduce your taxable income as a business and therefore you will be able to get away with paying less overall at the end of the year.
Most of us have some sort of healthcare plan in order so this won’t apply to the majority of us, but did you realise that if you don’t have health insurance you can be fined with tax? When you haven’t got health insurance you are a bigger risk and this causes you to pay more towards the running of services in the country as a result. You are much better off simply setting up a plan.
If you get a bonus working in your company then you will of course notice a big difference in the tax you have to pay due to this larger income. Although it might seem like a good idea to defer it until the next year, bear in mind that tax rises every year and this will likely cause you to pay even more for your money than you would if you simply did it now.