Want to save money in the taxes you pay every year?
Of course, nobody enjoys paying taxes. Every small business owner would much rather utilize their profits to re-invest back into their business and experience greater growth. Reality is, taxes are part of life.
There's no getting around paying it. However, there's many things you can do to maximize your tax returns and ensure you're not over-paying in taxes.
As a small business owner, you want to utilize all of the tax strategies you can, as well as deductions. It's your ethical right to do so as an entrepreneur.
In this video blog, I share some tax tips and strategies to help you save money in taxes.
Watch the video below:
(Click here to watch on YouTube)
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5 Tax Tips For Small Businesses
I recently published an article titled 13 Canadian Tax Tips: What I Learned To Pay Less Taxes To CRA. If you're a Canadian (or even an American), then it'd be worthwhile for you to check out that article for some of the best tips I have learned.
But, here are the main things that I have to say on the subject:
1. Hire A GOOD Accountant
Lawyers and accountants are worth their weight in gold. Every small business owner needs one. It's impossible for someone to give you specific advice tailored to your specific business or situation, because everyone is different.
Everyone reading this lives in different countries, states, provinces, and cities. We all run different businesses, are in different tax brackets, and each have a unique situation. That's why you need an accountant. An account will work with your specific situation and give you the best advice to help maximize your tax returns every year.
While I know most small business owners can't afford great accountants, you still need to factor an accountant into your business expenses every year. It might seem costly, but you need to think of the advantages to it. An accountant is SAVING YOU MONEY – not only in the short-term, but in the long-term as well.
Any piece of knowledge or education that is passed along to you from an accountant could be worth millions of dollars in savings to you in years to come. That's why you need to think of it as a long-term investment.
Think of an accountant as a coach. They'll help you strategize and can educate you on many things that will allow you to save money and maximize your business. So that's my first tax tip: hire an accountant.
2. Learn About Taxes
Taxes is probably one of the most boring subjects. Nobody really wants to learn about it. I didn't really pay much attention to taxes until I started making some significant money in the six-figures and had to start forking over a lot of it to the government.
I get motivated to learn about taxes FAST. While taxes seems like a boring subject, it's probably one of the MOST IMPORTANT subjects that you could educate yourself on. Making money is important, but it's ultimately what you KEEP.
Why spend more time and money learning to make more money, if you aren't able to keep as much of it as possible? You need to make learning taxes a MUST for you – nothing is more important.
3. Track Everything
One of the biggest tax tips I could give a small business owner is to track everything. Track all income, expenses, invoices, receipts, etc… You can either do the book keeping yourself, by investing in a software like QuickBooks. Or you can hire a book keeper to do it for you.
I found it useful at the beginning to learn how to do book keeping myself. It helped me have a sense of control over my finances and really learn where everything was going. However, at a certain point it doesn't make sense for you to continue doing your own book keeping.
I personally do hundreds or thousands of transactions every month in my businesses. I own 4 corporations, too. As you can imagine, it'd be a nightmare and very time consuming to do the book keeping all on my own. You want to leverage yourself and hire a good book keeping company to handle this for you.
4. Expense As Much As You Can Through Your Company
One of the biggest benefits of owning a corporation or LLC is that it allows you to use your business expenses as deductions. Any expense that is incurred for income can be a business write-off (although check with your accountant on certain expenses). You can use your internet, telephone, transportation costs, office space, and many other expenses as expenses that your business pays for. This is one of the easiest ways to maximize your tax returns.
5. Learn The Best Ways Of Paying Yourself
You typically pay the most in taxes from personal income. Here in Canada, paying yourself a salary results in paying yourself the most taxes. However, when you own a corporation, there can be some strategies to help lower the amount in taxes you pay personally. You need to figure out the best way to get paid from your company.
The two options are being paid a salary or a dividend. There can be different advantages or disadvantages to both, depending on your country's tax laws. However, you need to figure that out. Again, that's why an accountant is important.
Ultimately, most of your money should be kept in your company, to avoid getting taxed on it when taking it out to pay yourself. As your business grows, the more money you make, the more you need to learn the best tax tips and strategies for your business. The big companies pay millions to accountants and tax strategists to help discover loopholes that can save them millions more in taxes every year.
However, while you want to do what you can to legally pay your taxes without over-paying, I've also learned you need to change your mindset on taxes. Taxes aren't bad – they're good. It's what makes your country and city what it is. By paying taxes, you're supporting your government and local economy.
And don't forget – millions of people before you have paid their taxes and you get to now BENEFIT from it everyday with the city you live in and many perks that you can take for granted. Things such as medical, police, firemen, hospitals, the roads, parks, etc… are all there for you because of people paying taxes.
So in the end, do what you can to legally not over-pay in your taxes. But at the same time, change the way you view it and see it as a positive contribution you're making to your country. Please leave a comment below or let me know any questions you have. I'd love to hear what you think!