The corporate tax rate and its liability are a looming concern for many small businesses. This is especially true for companies that operate in different states or countries. But there are certain ways to reduce your obligation and liabilities to the government, particularly if you are not operating a standard “C” corporation. There are numerous alternatives to the corporate model to help reduce your taxes:
1. Claim all business expenses
To reduce your corporate tax liability, you should claim all business expenses. This includes car mileage, meals and entertainment, and other expenses directly related to running your business. For these deductions to apply, make sure that you have receipts. Otherwise, the IRS will not grant the deduction. You will be able to reduce your total tax liability in the long run with these deductions in place.
2. Keep track of all monthly expenses and revenues
Keeping track of your expenses and revenues will help you be more organized with your business. It will also help you to be able to calculate your income and expenses more accurately. This will allow you to determine what is taxable and show what is deductible as a result of running a small business in that area of the country.
3. Make charitable donations through your corporation
If you operate a small C-corporation, you may be able to write off donations and gifts to non-profit organizations. For example, if you donate clothes or even a building to a charity, your company can take off the value of that donation. You can also make donations directly through your business entity as long as it is related to the business’s operations. In addition, if your corporation owns a building or other property, you can donate the use of that property to a charity to make it tax-deductible.
4. Take advantage of the tax benefits
Some states in the U.S. and countries abroad offer tax incentives for small businesses. If you operate in a state that allows for tax deductions and exemptions, you should factor that into your decision-making process. The savings could be massive for several years if you take advantage of these generous tax breaks when starting a business, running it over time, and investing in new business ventures. Also, when you hire employees, you will enjoy a lower tax rate since the employee is then considered a contractor, not an employee.
5. Hire a professional corporate tax accountant
A corporate tax accountant can help you determine what deductions you can take and make sure they are done legally. This accountant will also help to reduce your liability to the government. It is always a good idea to consult a professional before taking drastic actions regarding your taxes. They will be able to tell you realistic options that you should consider and make sure that you are doing the right thing on your end concerning taxes. Furthermore, they will be able to flag any problems you might not notice on your own.
In conclusion, there are many ways to reduce your corporate tax liability. However, you should always consult with a professional tax accountant before taking drastic actions. They will be able to help you determine whether or not your chosen course of action is valid and whether or not it will save you money in the long run.
