When you own a company, you are an expert at what you do, but often times many find they have no idea that there are hidden tax breaks for small business that can benefit your income. That is one of the best reasons to work with a reputable CPA to handle your income taxes.

Many small business owners have to watch their overhead and will look for ways to cut corners, including filing their own taxes with online tax services or software. The thing is, you may be shooting yourself in the foot, because those platforms do not take into account some of the hidden tax breaks for small business that you are legally entitled to take. Let’s review some of the benefits that you may not be aware of:

  • Is your business a Limited Liability Company (LLC)? Depending on how a business is first established, you may have to pay a corporate tax. But if you set your business up as an LLC, it protects you from the negative responsibilities of business ownership, such as having your home repossessed if your business fails and your company owes money. At the same time, your income is passed through to you personally, which means you pay personal income taxes and avoid the corporate taxes that the big guys have to pay.
  • Buying equipment, vehicles and renting office space. Did you buy a car this year and use it for work? Have you purchased a computer, printer or other equipment to use for your business? All of these items are tax deductions. Your CPA will know what percentage of each you can deduct. This goes for travel and meals as well. For 2021 and going forward, meals are 100% deductible as long as they are for business purposes.
  • Retirement Plans. You can set up a 401(K) or Self Employed Plan for yourself and your employees, but make sure your CPA helps you to establish the right plan to defer income on your taxes.
  • Go Green and get tax credits. The IRS likes it when you do things that are good for society. By adding sustainability initiatives to your business goals, you are eligible for a General Business Credit. In fact, there is a list of available tax credits that you can take advantage of, such as providing access to your establishment for disabled employees and the public and providing health care for your employees. These are probably some of the things you would be doing anyway, but your CPA can get you credits that will lower your tax bill at the same time.
  • Home office deduction or accountable plan will allow you to write off certain expenses for the business use of your home. This can include a portion of your real estate taxes, utilities, mortgage interest, general repairs and depreciation. A CPA can help you calculate these expenses and document them appropriately.

All of these benefits are great if you are an established small business. But what if you are just getting started? Are there other benefits aside from hidden tax breaks for small business that would warrant hiring a CPA, or is this an expense you can save by doing all of your accounting by yourself?

There is no question that many of the day-to-day aspects of accounting can be done on your own. You can manage your business bank account, send out invoices and pay bills. But it is always a good idea to speak with a CPA even before you set up your business to make sure you are building a smart foundation that will continue on as your business grows.

For instance, you may want advice on the best business account to set up at a bank and how you pay yourself out of that account. Should you use your own credit cards for office expenses, or is it best to open a corporate card account? You don’t want to get your personal and business finances mixed together, and a CPA can show you how to organize all of your books to make it easier when you file taxes.

If you have payroll to manage, it can be helpful to have someone else play the ongoing role of bookkeeper. This way, you can run your business and your accountant can worry about all aspects of your financial management. This is helpful not only because it frees up your time, but also because your CPA can then be more aware of ongoing possible advantages to your taxes and show you more ways to legally save money with pre-tax dollars to lower your income and tax burden.

Even the amount that you may have to pay your CPA is tax deductible as a business expense. So, the overall benefits of having your CPA help you with the accounting and tax aspects of your business will likely pay for itself in the long run.

The takeaway here is that anyone not working with a reputable CPA may be missing out on a variety of hidden tax breaks for small business.

Ryan Jones

Author Ryan Jones

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