As a small business owner, tax liability is the money you owe the government when your business generates income. With changing laws and gray areas regarding deductions, exemptions, and credits, it’s no wonder small business owners may find their taxes a source of stress.

To reduce that stress, taxes shouldn’t be something to focus on only at year’s end. Use these tips on reducing your business tax year-round and see your taxes and stress level decrease!

Business Structure

Your company’s business structure is how it is organized. The most common business structures are sole proprietorships, partnerships, c corps, and s corps. Business structure not only affects how a business operates, but it also impacts how much a company pays in taxes. There are four main tax categories for businesses:

1. Income tax – paid on profits
2. Employment tax – employee Social Security and Medicare contributions
3. Self-employment tax – Social Security and Medicare contributions for self-employed individuals
4. Excise tax – special taxes for specific goods and services.

Net Earnings

Net earnings are the gross business income minus business expenses. Net earnings are used to calculate business income tax and the process differs slightly for different business structures. We are happy to help with the net earnings calculations and maximize deductions.

Employ a Family Member

One of the best ways for small business owners to reduce taxes is by hiring a family member. The IRS allows a variety of options for tax sheltering.

For example, suppose as a small business owner you hire your child. In that case, you will pay a lower marginal rate or eliminate the tax on the income paid to your child. Sole proprietorships are not required to pay Social Security and Medicare taxes on a child’s wages. They can also avoid Federal Unemployment Tax Act (FUTA) tax.

Retirement Contributions

Employer contributions to an employee retirement plan are tax-deductible. So it can benefit you and your employees. They can also carry an employer tax credit for setting up an employee retirement plan.

As with any tax situation, we are here to help. We can discuss these topics and more to ensure you have the best options for your business. Please give us a call at (402) 932-8815 for more information.

Sincerely,

W.E. Stevens PC