Are there confusions galore?
One thing is that you have defied all norms and taken a nonconventional route to sure success. You set up your shop with conviction and hard work knowing full well the challenges you will come across. Additionally, if you are a first generation entrepreneur, you also have a baggage of doing things right in the first time itself.
The US taxation law is a document along with various commentaries that is seventy thousand pages and counting. Obviously, even a taxman refers to it often in case of ambiguities. No one can be expected to know the laws fully well and especially with it being amended from time to time. The new taxation amendments in 2018 are something to look out for and positively.
Almost all of the small business owners at any given point of time in the accounting year keep asking these questions to themselves:
1. What kind of taxes am I liable to pay?
2. Why must I pay such high amount of tax?
3. How can I effectively reduce my tax liability?
Reducing taxation is really good for your bottom line:
Being able to reduce your tax liability without bypassing any legit laws and getting tangled into legal complications is what you must effectively look out for. The exercise is a great thing that will reflect very well in your bottom line and that is what is going to matter to you at the end of the financial year.
Here are some tips to help you look at things if you have missed them already:
I. Looking closely at Adjusted Gross Income:
You will be able to save as much as .9 percent liability in the form of ‘Medicare’ if your personal gross income is within the slab of $200,000. A little more if you are filing a joint tax. A lot of small businesses overlook this and end up paying so much extra.
II. Smart technology to the rescue:
You can opt for an accountable plan under IRS which will allow you to note down reimbursements to employees but not report them as income to the employees and save tax in chunks.
III. Using depreciation as a tool:
You may opt to deduct depreciation on your equipment instead of deducting the cost of it in toto in the first year itself so that the cost is spread evenly across the years as far as the equipment are used to the best of their abilities. This will help you set off some profits that you make over the years and claim tax benefits.
IV. Take your carry-overs seriously:
Capital losses, charities, credits, and deductions can be carried over to the next year so that the profits of the coming year can be set off against some of the liabilities of the previous accounting year. You may need to take the help of your accountant too.
V. Year-end planning is a must:
Use tax saving strategies to your advantage. Keep abreast with all latest amendments and last but not the least file your taxes in time to save on penalties and late fees. It all helps.