Owning and operating your own small business can be an exciting way to generate the income needed to support your family. Unfortunately, many small business owners find themselves facing a significant and unexpected financial burden when filing tax documents for their business.
If you are looking for a simple way to increase the profitability of your small company, reducing your tax burden could be a simple solution. Here are three ways you can reduce your small business tax burden in the future.
1. Put your family members to work.
When it comes to reducing the amount of money your small business pays in taxes each year, the solution could be as simple as making the choice to hire your family members as employees. If your business is structured as a sole proprietorship, hiring your spouse could be a great way to reduce your FICA taxes.
If your spouse retains his or her job outside of the family business, then the income he or she generates from this outside employment will count toward your FICA limit on a joint tax return. This helps you reduce the amount of FICA taxes your small company pays each year, reducing your overall tax burden.
2. Rely on independent contractors.
Rather than hiring full or part-time employees to complete vital business tasks, rely on the help of independent contractors instead. When your small business retains independent contractors, you are not required to pay the employer's share of Social Security or Medicare taxes for these employees.
Eliminating these expenses from your budget can help you reduce your company's overall tax burden, lowering the amount of money you owe when filing your business taxes each year.
3. Ask for advertising benefits when donating money.
While most business owners believe that charitable donations can help lower their tax burden, you should recognize that the IRS only allows these donations to be deducted from the tax burden of a small business when they can be classified as a business expense.
If you donate to an organization, ask that your company's logo be displayed on advertising materials or on the organization's website. This turns your donation into an advertising expense, which the IRS will allow you to deduct when filing your business taxes.
Reducing the tax burden for your small business can be a great way to free up revenue for more beneficial investments. Consider hiring family members or independent contractors, and be sure that you are receiving advertising benefits when donating money in order to decrease your small business tax burden in the future. Talk to a tax service that specializes in tax preparation for business to learn more.