One of the best ways to save money and meet your obligations is by paying more attention to your taxes. With a few simple, and most importantly legal, tax hacks, you can enhance your small business in more ways than one.
Here are a few tax hacks for the self-employed:
Tax Hack 1: Use Tax Filing Tools
It’s never easy to file taxes being a small business owner: You already have so many things to worry about. But using tax filing software should make it a lot easier. The benefits of using a tax filing tool include:
- Avoids errors and improve accuracy
- Keep yourself organized and save time
- Gives you plenty of safeguards you probably cannot afford otherwise.
This first tax hack is an important one: Use tax platforms to accurately file tax returns and enjoy full refunds whenever they apply.
If you’re looking for an easy way to organize tax deductible business expenses, the free ZenBusiness Money app automatically tracks them for you. It handles invoicing too!
Tax Hack 2: Prepare for the Future
As a small business owner, you can’t take long-term goals lightly. Preparing for tomorrow and staying up to date with tax information will help.
For instance, you should already have set your retirement goals by now, and if you haven’t – now is the time. In fact, by investing more funds into your retirement today you could end up with handsome tax benefits. Check out IRA tax hacks and harness your taxes with retirement savings.
Don’t stop there. Stay on top of your game by taking courses and workshops that will help you improve your business finances, marketing and stay current on industry best practices. The cost of such training to improve the skill you use in your existing business is a tax deductible expense
Tax Hack 3: Keep a financial footprint
The obvious one people ignore: Receipts. Don’t throw them away yet. Lots of receipts for services and goods are deductible from taxes and can balance your taxable income. Depending on your small business structure, you’ll find lots of deductibles you can take advantage of.
If keeping paper receipts for months or a whole year is cumbersome, start digital storage for them. Use any of the different apps out there to keep your paper trail digitized by capturing the receipts, storing and organizing them in one unique place.
Tax Hack 4: Know your home office deductions
Do you operate your small business from home? Do you know it’s possible to deduct expenses from it? Yes, you can deduct certain things such as repairs, mortgage interest, internet services and other utilities.
To hack this, ascertain the part of your home you’ve dedicated to running your small business operations. Tax software can help calculate the amount while the deduction is open for renters and property owners alike.
Tax Hack 5: Keep an eye on the tax calendar
You should never miss a tax deadline or wait until it’s too late to comply with tax laws. However, you could be really busy and hardly remember to keep up with everything.
With deadlines always on the horizon, you can rely on free tools provided by the IRS to avoid missing critical tax deadlines. Check out the IRS calendar for businesses and self-employed individuals and you won’t miss any tax payment.
Tax Hack 6: Mind your business equipment
If your small business purchases equipment you can make something out of it. Familiarize yourself with Section 179 and Form 4562 to ensure your equipment bought in 12 months is an expense for your budding business. In the long-term, this will be invaluable and will bring much-needed cash savings.
Old equipment? Don’t sell it yet. Incurring an ordinary loss (by abandoning it) might be a better option because it’s fully deductible. Study Section 1231 and ascertain how your old equipment will be classified to make some tax saving from it.
From tracking tax deductible items to preparing for the future, small and consistent practices help with taxes. Use these 6 tax hacks for the self-employed, and you’ll be off to a good start.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Kenneth W. Boyd is a former Certified Public Accountant (CPA) and the author of several of the popular “For Dummies” books published by John Wiley & Sons including ‘CPA Exam for Dummies’ and ‘Cost Accounting for Dummies’. Ken has gained a wealth of business experience through his previous employment as a CPA, Auditor, Tax Preparer and College Professor. Today, Ken continues to use those finely tuned skills to educate students as a professional writer and teacher.