5 Tax Tips For Small Business Owners

June 25, 2021

As a small business owner, you have plenty to do every day that doesn’t involve your taxes. Yet taking tax-savvy steps throughout the year helps you immeasurably. Review what your Los Angeles accountants want you to keep in mind to help your small business thrive. 

Utilize Larger Deductions For Your Equipment

Deduct the new or used large equipment you purchased for your business during the tax year, such as copiers or heavy machinery. The IRS created a federal tax deduction that goes up to $1.04 million for small business owners who invest in and use large equipment. You can also use the 100% bonus depreciation deduction on certain types of equipment, including computers and appliances, that’s been in effect since September 27th, 2017. The deduction recently increased from 50% to 100%. 

Take the 20% Business Income Deduction

Use the 20% business income deduction if you work with Form 1040. Sole proprietors, S corporations, partnerships, and limited liability companies qualify. The deduction allows small business owners to enjoy bigger tax breaks, such as a company that makes $120,000 in its first year saving $20,000 in non-taxable income. The tax break also helps reduce self-employment tax rates.  

Open a Retirement Fund

Consider creating a retirement account, such as 401 (k) or IRA. All money you add to your account(s) is tax-deductible. Your Encino tax consultants emphasize that you might also receive a small business tax credit for opening the account depending on which you select. As an added bonus, you’re helping your retirement efforts. 

Track Your Expenses

Keep a record of your expenses so you can deduct everything that’s applicable on your tax documents. There are plenty of software options for tracking expenses accurately so you don’t end up overpaying. And remember, the product in question is something you purchased for your small business, you can deduct it or at least a portion of it. 

Work With a Tax Prep Service 

Employ tax professionals to help you prepare the documents, at least for the first few years that you’re in business. Pro assistance ensures that what you send the IRS is error-free to sidestep issues like incorrect filings and audits. It also means you’ll learn more about tax preparation processes. 
For help with your taxes, contact Wallace & Associates, your accountant service in Los Angeles.