Most small business owners are already aware of most of the tax deductions that they can earn after creating a corporation. But Bankrate.com‘s Marcia Passos Duffy says there are some less common ways to save money on taxes.
The first way Duffy suggests a small business owner can reduce the company’s taxes is by hiring family members. She says that a small business owner doesn’t need to pay unemployment taxes to employ family members. Entrepreneurs may also be able to avoid paying social security and income taxes by hiring their own children – as long as their jobs are relevant to the company and follow child labor laws.
An entrepreneur can also reduce his or her taxes by paying bills before the end of the year. If a company has the cash on hand, Duffy writes that paying all of a company’s January bills in December allows for them to be deducted on the previous year’s returns. That process can then be continued at the end of every year.
But when planning deductions, it’s also important to think about the company’s future plans. Associated Press columnist Joyce Rosenberg writes that if a small business owner has a choice between using a deduction one year or the next, they should examine when the company will owe more taxes. If next year will be worse, it may make more sense to postpone the deduction until after the new year, if possible.