In this post we cover the best way to save income from tax. For all of the attempts to save money and consider their resources, many businesses every year overpay when it comes to filing their taxes. There are a variety of deductions which many businesses don’t know about that could make a huge difference on the final number they pay for the year.
Of course, the U.S. tax code is more than seventy thousand pages long, so this oversight is completely understandable. Here are four great and relatively simple ways to save on taxes for the upcoming year.
Use an Accountable Plan to Reimburse
When you reimburse your employees for various components such as travel, tools, and entertainment, you can use a method to do so while adhering to IRS requirements, called an accountable plan. This plan can be used to deduct business expenses but doesn’t report the money you save as income for employees. This means that you could save employment taxes and lower your general income.
Monitor Your Expenditures
All businesses have several expenditures that they need to make throughout the year, but you can actually save on tax by watching your expenses and being careful about what you spend. For example, you can deduct the cost of any machinery you acquire and can even get the money up front. You can also spread the cost of these acquisitions throughout the next several years, depending on your situation. The choice is up to you.
Utilize Fringe Benefits for Employees
When you pay your employees extra wages, the payment will trigger additional tax costs on your business. You can escape these costs, however, if your company pays for a number of “fringe benefits” to your employees. These are tax-exempt and include long-term care insurance, group term life insurance, disability insurance, and transportation benefits. Paying for these benefits, but it may be worth it to avoid paying certain taxes on your employees’ wages.
Locate Your Profits into Retirement Plans (HINT: One of the Best Ways to Save Income From Tax)
When you set up a 401(k) for your employees, they’ll save on their investments and so will you. Taxes are not taken into account until your employees take their taxes out of the retirement accounts, meaning they only have to factor in taxes once for the lifetime of the account. This is one of the best ways to save income from tax. Many businesses choose to open a 401(k) for their employees to cover for their retirements in a flexible and dynamic way.