Improve your Business by Understanding Tax Laws
For most Americans, it’s not necessary to know the ins and outs of tax law. Most individual tax returns are so simple that people can just do them using tax preparation software at home. For people who work for themselves or own small businesses, however, it gets trickier. Even though it’s almost always a very good idea for business owners to hire an accountant, it’s also a good idea to get to know the tax laws.
If you’re a business owner and you’ve been using tax software and hoping for the best every tax season, then it may be about time to understand the tax laws to improve your business. Even small businesses can save money by staying up to date with current laws. Let’s take a look at why it’s so important to be familiar with the tax laws that apply to your business—and how becoming knowledgeable can help your business become more profitable.
Never even thought about trying to understand the tax code? This year, everyone else is figuring out what it all means too, since the sweeping tax law passed in 2017 has made some enormous changes that affect small business owners. This is a great time to get educated, since the new tax laws will be coming into effect for the 2018 tax season. Those laws changed the most for businesses, changing the tax rates and deductions allowed.
In addition to the federal changes, your state and local area might have further requirements—and those could have changed since last year as well. It’s important to realize that you’ll need to update yourself on the changes each year, since tax laws tend to change year over year to some extent.
Creating More Success with Smart Tax Planning
Accounting might not be the most fun aspect of owning a business, but it can make or break a company. If you run out of money, you’re in trouble. Every little bit you can save helps to make your business more stable. Making better accounting and business decisions not only put money in your pocket, they can even help you bring your business back from the brink.
There are so many examples of companies that were struggling, but went on to flourish under the right leadership. Marvel, the entertainment company, was on the brink of collapse when a new CEO took over in 1999. Under Peter Cuneo’s direction, the company was sold to Disney in 2009 for $4.3 billion and has been raking in revenue. Small businesses, without the name recognition and financial backing, need to be even more careful about strategic business decisions.
Key Tax Benefits
Knowing what you can legally deduct can leave your business with a lot more money in April. For example, deducting business equipment, mileage, and other expenses can really add up. Businesses can also save money by providing employees with great benefits rather than higher pay (this does not mean you shouldn’t pay employees a fair market rate, of course). Setting up a retirement plan for yourself and your employees can also allow you to defer taxation. Learning which savings are allowed is key, because you’ll be able to find our works best for your business. Don’t forget to keep a record of every transaction, no matter how small. It all adds up!
Ways to Learn Tax Law
It’s not the most fun activity, but learning tax law is important. You can get the basics in several ways. Self-education is a good option, but you can also talk with experts and find a trustworthy accountant to help you. You may even be able to find a class on taxes for small business owners. Don’t trust everything you hear without getting a second opinion—tax law is very complex.
Spend the Time
Don’t take the laws for granted, and don’t feel like taxes are the worst part about doing business. Be willing to do you research and spend time understanding taxes, so you can set up your business in a way that it profits and the laws can help you be successful. There are lots of great resources out there on small business taxes. You don’t have to dread April every year—with the right knowledge, you can get tax season working to your business’s advantage.