Small Business Tax Strategy
Planning to start a business or is already running one? Below is how you can plan ahead for your small business for tax savings.
Tax Credits
Utilizing Business or Individual Tax Credits
Tax credits are different than tax deductions. A tax credit is an amount that taxpayers can subtract, dollar for dollar, from their income tax liability. Besides varieties of tax credits available for your personal tax, there are many other tax credits that might apply to your business.
Some general business tax credits are below:
R&D Tax Credits
Work Opportunity Tax Credits
Employee Retention Credit
Tax Deferral
Look for ways to defer your taxes legally
As a small business, you have the option to choose cash accounting method or accrual accounting method. If you choose cash method, your income accrued that has not been received can be deferred to next year. It will help your cash flow in terms of business operation.
Increasing business expenses in current year to set up for next year can also help your business cash flow. A business utilizing cash accounting method may find ways to shift income and expenses legally by proper tax planning.
Entity Type
Consider to change your tax status
As a business owner, you might have started your entity as a sole proprietorship. As the business grows and scales up, there might be a need to change the tax status for liability protection and more tax savings.
Some business structures are below:
Sole Proprietorship
Limited Liability Company (Can be taxed differently)
Corporations (C Corp or S Corp)
Business taxes are impacted by the structure you choose. To find out what works best for your business?
Contact Vincent Ha, CPA today for more information.
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