small business owner

10 Smart Tax Tips for Small Businesses in 2021

small business taxesTo run a successful small business, there are a few tax tips every owner should know to help save money and minimize their tax liability. Here are our top ten tips:

  1. Review Your Business Structure (You may want to adjust your business structure to receive more tax savings. Sole proprietorship, partnership, corporation or S corporation are the most common ones.)
  2. Take Advantage of Tax Credits (Depending on your business, you could qualify for a variety of tax credits—which are as close to free money as you can get. It’s time well spent investigating your options since certain credits will offer dollar-for-dollar reductions on your taxes.)
  3. Track Your Expenses (Reduce your taxable income and tax liability by saving your receipts and tracking your business expenses.)
  4. Keep an Eye Out for Carryovers (Some deductions or credits may not be fully used in one tax year and are eligible to be carried over into future years. These can include items like capital losses, net operating losses, home office deductions and charitable contribution deductions. Don’t forget them from one year to the next.)
  5. Year-end Tax Planning (In November, take the time to do some year-end tax planning. It will help you reduce taxable income on your next tax return.)
  6. Take the QBI Deduction (The Qualified Business Income deduction is for eligible small business owners, as well as self-employed. You can deduct up to 20% of your qualified business income on your taxes.)
  7. Establish a Retirement Account (Contributing to or offering a 401K or a simple IRA plan to your employees (even just for yourself if you’re a solo operation), will result in tax benefits.)
  8. Consider Common Tax Deductions (If your home office is used only for business, you can take the home-office deduction. If you drive your car for business (other than your commute), there’s a tax benefit to be had by tracking your miles.) 
  9. Get Your Money’s Worth from Your Business Equipment (Section 179 allows small business owners to avoid tracking depreciation by treating equipment as a business expense in the year it was purchased. It can be anything a small business owner needs to run a business, from an industrial-grade oven to office furniture to computer items.)
  10. Hire Your Family (If you have family members who can help with tasks essential to your business, you can add tax savings to the benefits. Hiring a family member means you can take a business deduction for reasonable compensation paid to that person—lowering your taxable income.)

In addition to our Top Ten, it’s crucial to have a smart accounting system in place and a strong tax strategy to follow throughout the year. We can help you with that! Contact Lahrmer & Company LLC and we’d be happy to discuss your business needs to set you up for success! You can reach by phone at (866) 474-1238 or by email at office@lahrmercpa.com.

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