Tax time is one of the most stressful time periods of the year for most of the small and mid-sized business owners. Those who are well-prepared for tax season are less-tensed than those waiting until the last minute. In this blog, we have tried to sort out some of the most effective ‘tax help tricks’ that will not only minimize your stress, but also save you time and money.
1. Accountable Plans
Accountable plans are among your most trusted legal companions to save tax. Do you reimburse your employees for entertainment, travel or other costs? If not, start doing so on accordance with the Accountable Plan that meets IRS requirements. With this plan, you are able to deduct the expenses. Remember; don’t report the reimbursements as income to employees.
2. Insurance expenses
If you pay for insurance expenses, it’s a great way to reduce the tax amount. You can include it in the business insurance expenses that you pay every year. For this, you need to fill the IRS form 1040. It can assist you in determining your business insurance deduction. Expenses of liability insurance, commercial auto insurance, workers compensation insurance and business interruption service insurance are some of the insurances that you can add to the business expenses and declare it to reduce the tax.
3. Abandon property
If you have a property which is worthless for your business, consult your accountant to gain tax benefits out of this property. Ask him to abandon the property rather than selling it for a minimal amount. It will enable you to declare ordinary loss on the property, which is fully deductible. However, don’t show the loss as a capital loss, as it is subject to limitations. If you are not sure about how to go about it, you can obtain tax help from professionals to guide you through the process.
4. Set up Retirement Plan
Setting up a retirement plan can be of a great tax help for you. It can let you enjoy plenty of benefits. The plan is not beneficial for the employer only, but for the employee as well. As an employer if you contribute to the retirement plan, it is completely tax-deductible. The assets required in the plan are also tax-free. In addition, by giving a retirement plan, you can hire and retain better employees.
5. Business Expenses
Among other tax-saving tips is a business expense. Your business expense is totally tax-deductible, but only if it is related to ordinary or necessary. According to the Internal Revenue Service (IRS) of the United States, ordinary expense is common and accepted in your trade or business whereas necessary expense is important and helpful for your business or trade.