7 tax saving strategies for small and home-based businesses, startups and solopreneurs
Approximately one-third of taxpayers purportedly wait until the last 30 days to file. That’s an egregious opportunity loss to potential tax savings because sound strategies have not been employed all year through.
Sadly, many small and home-based business owners, solopreneurs and startup owners are serial late filers and miss out on maximizing tax benefits unique to their business structure. In fact, most have no idea there are tax professionals that exclusively focus on this niche who can help entrepreneurs realize tremendous tax advantages.
With this in mind, here are seven tax saving strategies to heed.
- Choose the right entity for your business.
Per the Global Entrepreneur Monitor Report, 69 percent of all start-ups in the United States are home-based businesses and 59 percent of established businesses more than three and a half years old continue to operate as home-based businesses. If you’ve decided to start a business or maybe you have been running one for a while, become official. Let your county, state and the federal government know that you’re in business by registering it under the entity type that best suits your business goals. Remember, there isn’t a one-size fits all for home-based businesses, so make sure to consult with your tax professional or an attorney about the best business entity for you.
- Audit-proof your business.
Audit-proofing your business means more than just saving receipts. Depending on the type of home-based business you operate, you may need to keep calendars, mileage and personal use logs. All home-based businesses aren’t created equal, so speak with your tax professional about what you can do to make your business tax compliant.
- Get a home-based business tax professional.
If you go to an optometrist for your eyes and a podiatrist for your feet, why wouldn’t you seek a tax professional that understands the intricacies of your type of business? Choosing a specialized tax professional can save you thousands of dollars (in missed deductions) and time (trying to learn pertinent IRS regulations). Do-it-yourself software can’t do it all and software is only as good as the person using it. If you’re in business, leave maximizing your savings to professionals that can help you.
- Get a second look.
In 2012 (for filing year 2011), nearly a quarter of a million individual business returns not claiming the Earned Income Tax Credit (excluding farm returns) were examined by the IRS and assessed additional taxes. Many tax professionals offer complimentary consultations regarding their services and will take a look at your prior year’s returns. If the IRS is going to make sure they don’t miss a dime, you should make sure you don’t miss a deduction.
- Tax planning is year-round.
If your business isn’t seasonal, you need a year-round tax plan, strategy and procedures, not to mention an available professional. When you have a simple tax situation, it is okay to check on your taxes once a year if not much has changed in that year (e.g., purchasing a home). However, if you’re running a business, the tax implications of your business’ decisions are a 365-day consideration.
- Start a retirement plan.
The government makes it very advantageous for home-based business owners and solopreneurs to save for retirement. Even if you’re just starting out, planning for your future is one of the best savings strategies. Take full advantage of the plan that best suits you and your long-term goals.
- Have integrity.
It’s not a deduction you’ll find in an IRS publication, but running your business on the up-and-up is good for your bottom line. Tax fines and penalties for not running your home-based business like a real business are stiff! Seek out the information you need to operate a successful home-based business then consistently follow the appropriate rules and regulations.
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