The 15 Best Small Business Tax Tips for Filing in 2019

There are more than 29 million small businesses in the United States alone. And those businesses operate in every industry you can imagine, from dog walking to wealth management.

No matter what industry they’re in, each one has to pay taxes to the government.

If you’re like most business owners, your tax bill is incredibly high at the end of the year. But it doesn’t have to be. There are ways to save on your tax liability and keep more money in your pocket.

You just need to know how to maximize your deductions each year. Here are a few simple small business tax tips to help you save money in 2019.

1. Separate Business Expenses from Personal Expenses

When you’re first starting out, it’s easy to lump your personal and business expenses together. But doing so leads to confusion and makes it hard to keep track of what you spent on personal items versus business items.

Instead, separate your personal and business expenses. Create a designated business checking account to keep track of your spending.

At the end of the year, it will be easier to track your income, expenses, and business performance.

2. Keep Track of Your Receipts

Many of your business expenses are tax-deductible. The more you deduct, the lower your tax liability will be.

But you need to be able to prove that you made those purchases for use at your business. That’s why it’s always best to keep track of your receipts.

Create a file for those documents and get in the habit of putting all business-related receipts in that file. You may also want to scan those receipts and save them on the cloud. This way, you’ll always have access to those receipts even if the originals get misplaced or destroyed.

3. Deduct Your Travel Costs

If you’re traveling for business, you may be able to deduct a portion of those related expenses. This means your hotel bill, transportation, and even meals with clients are all qualified expenses.

Again, keep track of what you spend, save the receipts, and report the spending on your taxes at the end of the year. If you travel a lot, you could reduce your tax liability by several hundred dollars!

4. Make the Most Out of Your Supplies

Your business needs good equipment and supplies to function properly. Depending on the industry you’re in, those costs can take a huge chunk out of your operating budget.

Luckily, the IRS understands and lets you deduct the cost of supplies and equipment deemed necessary to do your job. Keep in mind that you may not be able to deduct some electronics. Those items may be eligible for depreciation over several years rather than an up-front deduction.

And if you use that equipment for personal purposes, think freelancers with a single laptop for business and personal use, you can’t deduct the cost at all.

5. Wages and Bonuses Are Deductible

Believe it or not, most companies spend about $4,000 per employee during the hiring process alone. This includes time screening applicants, interviewing, and onboarding new hires.

That’s nothing compared to paying their wages each month.

But wages and bonuses, like office supplies, are a necessary expense. This means they’re tax deductible!

Keep detailed records of how much you pay your employees and any wage increases made throughout the year. These numbers can cut your tax bill as long as your business is up and running.

6. Monitor Your Operating Costs

Employees aren’t your only expense. You also pay rent or cover a mortgage for your building. And with that monthly expense, you pay for utilities, internet, parking subsidies, and other basic necessities.

If you couldn’t reasonably operate your business without these expenses, you can likely deduct them from your taxes.

7. Stay Up to Date on Quarterly Payments

When you work for someone else, taxes get withheld from your paycheck throughout the year. But when you work for yourself or own a business, you’re responsible for withholding those taxes for your business and sending payments to the IRS every quarter.

Stay on top of those quarterly payments. Paying too little throughout the year or missing payments altogether can earn you a hefty fine from the government.

8. Use Good Software

Filing taxes is difficult, especially if you’re taking multiple deductions every year. But that doesn’t mean you have to struggle with compiling your information or filing at the end of the year.

You just need the right tools. Professional software for tax preparers takes a lot of the guesswork and tedious paperwork out of the equation. You’ll get your taxes ready quickly and stay organized in the process.  

Even better, the cost of the software is tax deductible as part of your company’s supply budget!

9. Look at Your Charitable Donations

You can deduct donations you make to organizations in the community. Both cash and product donations count. But to take this deduction, you need to get a receipt for each contribution.

If you’re donating physical property, make sure you have itemized receipts. This tells the IRS what you donated and the approximate value of each donation.

10. Deduct Business Insurance Premiums

Insurance protects your business from unexpected disasters, but it costs a pretty penny. For most business owners, going without insurance isn’t an option.

You can deduct the premiums you pay each month for every business insurance policy you have. And if you offer health insurance to your employees, you might qualify for a tax credit of up to 50 percent of the premiums you paid for their coverage.

11. Embrace Continuing Education

Believe it or not, you can deduct a portion of the cost of continuing education classes, books, courses, and seminars. So, take advantage of those deductions!

Find a few courses you’re interested in each year and take them. If your employees want to grow their skills in the service of your company, you can deduct their costs as well.

The courses and classes don’t even have to relate to your specific industry. As long as you can use them to improve your skills on the job in some way, they’re deductible.

12. Make Use of Your Home Office

Some businesses don’t need a full office space or desk in a coworking community. All you need is a home office.

And that home office can reduce your tax liability. You’re able to deduct a portion of your mortgage or rent payments, utilities, and internet costs each year.

But what if you only work from home occasionally? You may still be eligible for the home office deduction.

The key is calculating how much of your home and expenses qualify for the deduction. This helpful article details how to calculate your deduction accurately.

13. Prioritize the Payroll Process

Every year, you pay payroll taxes to the IRS. If you’re audited or the IRS has a question about what you’ve paid, you need to have statements to justify your payments.

Make payroll a priority and consider hiring a dedicated payroll expert to handle the job. This way, everything stays organized and you’re less likely to face issues and penalties come tax time.

14. Maximize Retirement Fund Contributions

Planning for retirement is smart, but it’s also a great way to maximize your tax deductions, especially as a self-employed business owner. You’re able to deduct contributions to your retirement plans each year.

If you have employees and match their contributions, you can deduct those matched contributions as part of your business expenses. Make sure to keep track of how much you contribute to each employee throughout the year.

This should be part of your company’s payroll documentation anyway, but always double check.

15. Hire an Experienced Accountant

Tax law is complex and changes from year to year. If you find any of these small business tax tips even slightly confusing, consider hiring an accountant.

It’s their business to understand the tax code. They know which deductions your business qualifies for and the types of documentation required to get those deductions.

Your accountant might even find deductions you didn’t know you qualified for!

Even better, they’ll handle the filing process for you so you can focus on growing your brand. The less time you have to spend interpreting tax regulations, the better off you’ll be.

Use These Small Business Tax Tips

No matter what industry your business is in, you always want to save money. These small business tax tips should help you maximize your deductions and lower your tax liability each year.

Looking for more ways to save money as a small business owner? Check out our recent posts for more tips!