If you own and run a small business that is growing and doing well, you may want to talk to your accountant about finding ways to reduce your tax liability for the year. Accountants are great at knowing the best tips and strategies for this, and your accountant might suggest using some of the following methods to help you reduce your taxes for the year.
Invest in Large Equipment
When you purchase large equipment or machinery, your business can benefit in many ways. One of the ways is by offering an easier or more efficient way to complete operations of your business, but your business can also benefit from the tax write-offs this may offer. When you buy a large piece of equipment, you will have the ability to depreciate the equipment. Depreciation is an expense of your business; however, it does not cost any actual physical money. The tax benefit here is that depreciation reduces your company's net income. Anytime you can find ways to reduce your net income, it will reduce your tax liability too.
Offer Benefits To Your Employees
Another great way to reduce your company's tax liability is by giving your employees some of the profits or offering them incentives or fringe benefits. For example, if you set up a retirement plan for your workers, you may pay less in taxes, plus it will make your employees happy. If you offer health insurance to your employees, you can write off the amounts you pay for this benefit, which will reduce your net income. By talking to an accountant, you can learn about other forms of benefits you could offer that will could make a big difference in the amount of taxes your company pays at the end of the year.
Review Other Types of Business Structures
The other area your accountant might talk to you about involves business structures. A business structure is the way you set up your business, and it plays a huge role in the amount of taxes you will pay. There are many types of business structures you can choose from, including sole proprietorships, limited liability companies, and S-corporations. Ask your accountant if switching your business to a different structure would help reduce your tax liability. If so, you may want to consider doing this as part of your financial planning for the year.
If you have any questions relating to tax planning or financial planning, talk to a financial planning company in your area that specializes in helping small business owners.