Tax season can be a stressful time for small business owners. Not only do you need to ensure that all of your financial records are up-to-date and accurate, but you must also make sure that you take advantage of all the tax relief opportunities available. Fortunately, there’s plenty of help out there to make the process easier.
This guide provides an overview of the most common types of tax relief available to small businesses, as well as tips on how to maximize each one.
1. Debt Forgiveness Programs
In addition to the other types of tax relief we will mention, many state and federal government programs offer debt forgiveness for small business owners in certain circumstances.
The exact amount and eligibility criteria vary depending on the program, so it’s important to conduct careful research about the debt forgiveness program you are investigating and make sure that you meet all requirements before applying. This can help ease your financial burden significantly and provide much-needed relief during challenging times.
2. Deferral Programs
Many states offer deferral programs that allow small businesses to delay their filing deadlines for taxes due in certain circumstances.
As long as you meet certain criteria, such as having experienced a significant drop in revenues due to the pandemic, you can be eligible for a deferral and have more time to file your taxes.
3. Tax Credits
There are also many tax credits available to small business owners that can help reduce their overall tax bill.
The most common credits include the Earned Income Credit (EIC), Small Business Health Care Tax Credit (SBHCTC), Research & Development Credit (R&D) and Child Care Tax Credit (CCTC).
Depending on your income level and other factors, you may qualify for multiple credits that could significantly reduce your tax burden.
Deductions enable businesses to lower their taxable income by subtracting certain expenses from it, including start-up costs, business supplies, travel expenses and more.
Although the type and amount of deductions you can claim will vary depending on your industry and other factors, qualified businesses may be able to deduct up to 100% of certain expenses.
5. Tax Strategies
There are also several strategies that small business owners can use to reduce their tax burden even further.
Some of these include accelerating or deferring income; taking advantage of index funds; contributing to a retirement plan; setting up an Employee Stock Purchase Plan (ESPP); or hiring family members as employees, among others.
6. Professional Help
It’s always wise to seek professional advice when filing taxes as a small business owner. Consulting with an accountant or lawyer can help you understand the different types of credits and deductions that you may be eligible for, as well as provide valuable guidance on how to best leverage them in order to reduce your overall tax burden.
They can also help you become aware of debt forgiveness programs and other government initiatives that might provide additional relief.
Ultimately, having someone knowledgeable about taxation laws and regulations on your side will ensure that you’re able to maximize any available savings opportunities. With this expert assistance at your disposal, you can feel more confident approaching this important task year after year.
Filing taxes as a small business owner can be a daunting endeavor, but there’s plenty of assistance out there to make it easier. By familiarizing yourself with the various types of tax relief programs available, understanding how to use tax strategies to reduce your overall burden and consulting with a professional when needed, you can maximize your savings and avoid potential pitfalls.
With these tips in hand, you’ll have greater confidence in tackling this important task each year.