Here Is Our Small Business Tax Tips
1. Organize as an S corporation:
Small businesses can choose to be taxed as an S corporation, which allows the business to pay a salary to the owner, who is also an employee, and distribute the remaining profits as dividends. This can help to lower the overall tax burden by taking advantage of the lower tax rates on dividends.
2. Utilize deductions:
Small businesses can take advantage of deductions such as the home office deduction, vehicle expenses, and other business-related expenses. This can help to lower the overall tax burden by reducing the business’s taxable income.
3. Hire your kids:
You can hire your kids to work in your business. As long as they are paid fair market wages, their earnings can be recorded as expenses on the financial statements. If their wages are below the standard deduction of $13,850 in 2023, their wages do not need to be reported. In other words, you would take a deduction against the income of your business without reporting their income. Everyone’s situation is different, you may still want to report and file for them for certain tax credits.
4. Maximize retirement plan contributions:
Small businesses can also consider setting up a retirement plan, such as a 401(k) or a SEP IRA, and maximizing contributions to these plans. This can help to lower the overall tax burden by reducing the business’s taxable income.
It’s important to consult with a tax professional to evaluate your specific situation and find the best strategy for your business and family.
