During the summer, taxes are probably far from the top of your mind. However, even though the next tax season is still many months away, you should still be taking steps to reduce what you owe. Here are some tips you can use to make the next tax season easier for your small business.
- Pay your estimated taxes.
If you are self-employed or you own a business, you must pay estimated taxes on a quarterly basis. If you don’t pay these taxes on time, you may owe a penalty at tax time. Summer is the perfect time to make your second quarterly tax payment of the year. To avoid all associated penalties, make sure your tax payment is postmarked by June 15. If you aren’t sure how much you need to pay each quarter, ask your tax preparer for an estimate.
- Increase retirement contributions.
If you want to owe a lower tax balance for the year, consider increasing any deductible contributions you are currently making to retirement plans. If you aren’t already contributing to a retirement plan, consider establishing one. In either case, always make sure that your contributions remain within the IRS’ established limits for the year.
- Keep track of all expenses.
One of the best ways to lower the amount of tax you will owe for the year is to keep impeccable records of all of your business expenses. You can use these expenses to reduce your taxable income and even lower your tax rate. To get the most benefit from this strategy, be sure to keep documentation of all of your business mileage, meals and entertainment expenses throughout the summer. Having these documents will make it easier to calculate your deductions at tax time. It will also provide you with the proof you need in the event of an IRS audit.
- Consider investments that will lower your tax liability.
If you are worried about owing a significant amount of tax for the year, consider making some investments during the summer that will lower your liability. For example, you may consider purchasing new equipment that can be deducted under Section 179 of the Internal Revenue Code.
- Consult your tax professional.
Summer may not be the most important season when it comes to taxes, but you can still take steps to reduce what you owe and make tax season slightly easier for your business. Keep in mind that decisions made year-round impact your tax obligations. Working with your tax preparer throughout the year, instead of waiting until year-end, allows you to be more proactive in managing your tax liability. If you aren’t sure what you need to do to prepare for the upcoming tax season during the summer months, contact your tax preparer for guidance.