10 Strategies to Keep Your Business from Overpaying the IRS This Year

Understanding how to take advantage of tax deductions is essential for any business. The IRS offers several options for companies to work out their tax deductions, but do you know how? In this blog, we reveal the most common deductible expenses and how to use them effectively to save money.

Take note, the first step to start this process is to choose well your business structure or get to know it in depth if you already have it; depending on which, you are going to pay more or less taxes, and it is a guarantee to improve your financial management. There are different types but these two are the most common:

Common Types:

LLC (Limited Liability Company): If the legal structure of your company is an LLC, you will undoubtedly have greater tax flexibility, because you can report income as a sole proprietorship or as a partnership, avoiding double taxation.

S-Corp (S-Corporation): If you create a business structure within this formality, you have the opportunity to reduce self-employment taxes, since income can be allocated between salary and dividend distribution, and so decreasing the tax load.

🎯How to reduce your business' tax load?

⚠️ Important: Before moving on with any process, you should consult a specialized accountant. Every Business is unique and laws vary per state.

• Tax reduction for operating expenses: The IRS allows businesses to deduct the operating expenses they usually use. Which ones apply? Here, we tell you:

  • Business Operation: Rental of the premises and business insurance.

  • Utilities, such as water, electricity, gas and internet.

  • Payroll: Employee salaries and benefits.

  • Equipment and other supplies.

  • Marketing and advertising budget.

• Devaluation and/or amortization of assets: Did you know that you can reduce taxes due to devaluation or the useful life of your working assets? Companies can reduce their tax burden through depreciation and/or amortization of assets.

  • Devaluation or depreciation: This applies to vehicles, machinery, and other equipment that lose value over time.

  • Amortization: Applies to liquidate copyrights, patents, and other franchise costs.

    
    

📝 Tax credits

• Work Opportunity Tax Credit (WOTC): in case you didn't know, hiring minorities helps you save money. If your employee roster includes seniors, the disabled, and others, you can apply for tax breaks while helping the community.

• FICA Tip Credit: If your supermarket has tipped employees (such as an in-store bakery or cafeteria).

• Employee Benefits: If you manage a large list of employees, and you have a benefits program for them such as health insurance, retirement plans, and transportation subsidies, without a doubt, this money can be deducted from your taxes.

• Loss and donations reports-

  • Foundations and/or Donations: If you are part of non-profit organizations or participate in donations.

  • Commercial loss claims: If a product is damaged or expires, you can report it as a loss and apply for deductions.

• Inventory and cost management: If you use accounting methods such as FIFO or LIFO, you can optimize tax payments, depending on how product costs fluctuate.

• Deduction for using energy-efficient buildings: If you own or make use of a building with these features, you may qualify for a tax deduction by promoting energy savings. The deduction is allowed under section 179D of the Internal Revenue Code and was expanded under the Inflation Reduction Act of 2022.

• Commercial use of your home: If your home is used for commercial purposes, you may be eligible for a tax deduction, read more about this. HERE.

• Fees for the commercial use of vehicles: If you have an automobile for business, charitable, medical, or moving purposes, you can get a deduction based on the mileage used for that purpose.

• Claiming credits: If your company has any credits you can apply for tax deductions. Want to know which ones might apply?

  • Clean vehicle credits.

  • Advanced energy projects.

  • Energy-efficient home builders.

  • Federal Insurance Contributions Act (FICA) tip credit.

Find more information on business deductions, on the official website of the IRS, Credits and deductions for businesses

For business owners, taking advantage of strategies such as deductions, tax credits, and appropriate business structures can be the best opportunity to recover capital that can be reinvested in the development of the company, promoting further competitiveness and sustainability. Our advice is to stay well informed of these benefits as set by your State!

Did you find this info useful? Subscribe to our blog, where we provide you with the best information to grow your business.

Follow us on our social networks to stay updated with value content, products and offers:

Facebook, X, and Instagram

LinkedIn: Universum

📣Disclaimer: This information is for informational purposes only and does not constitute legal advice. It is recommended that you consult with a professional to ensure compliance with the specific requirements of your state or country.