How Small Business Owners Can Prevent Having a Tax Debt

Business owners have a lot on their plates. Growing a business and keeping it financially healthy can be daunting tasks. One of the main things you need to avoid as a business owner is getting in trouble with the IRS.

Having a large tax debt bill hanging over your head can bring about a lot of stress. Luckily, the IRS has many programs designed to help business owners and consumers with substantial tax debt. Learning more about the debt forgiveness program offered by the IRS is a good idea if you’re unable to pay your current tax bill.

How Small Business Owners Can Prevent Having a Tax Debt

One of the main things you need to focus on as a business owner is avoiding tax debt altogether. Here are some things you can do to accomplish this goal.

Hiring Family Members Can Lower Your Tax Liability

One of the main things you need to do to eliminate tax debt is to lower your annual tax liability. There are a number of things you can do to accomplish this goal. One of the best things you can do to lower your tax liability is to hire family members.

Hiring a spouse allows you to avoid paying unemployment taxes. This can significantly lower your annual tax bill and allow you to avoid going into debt with the IRS.

Incorporating Your Business is a Must

Choosing the right business structure is something most business owners fail to prioritize. Selecting the wrong tax structure for your business can result in a significant tax burden. If you are currently running your business as a sole proprietorship, it might be a wise move to switch to a limited liability corporation (LLC).

By doing this, you can avoid paying FICA taxes and decrease your overall tax liability. If you feel like using an LLC for your business is a good idea, you need to seek out the help of a tax attorney. With this legal help, you can file the appropriate paperwork to change your tax structure.

Focus On Maximizing Tax Deductions

When the time comes to file your annual taxes, the worst thing you can do is handle this task alone. The average business owner knows very little about the deductions they can use to lower their tax burden. This lack of knowledge can lead to an ever-growing tax bill. Focusing on maximizing the deductions you claim in your taxes is important.

Working closely with a tax professional is the best way to ensure you get all of the deductions you deserve. Paying professionals to help with tax filing can help you save a lot of money in the future. It is their job to stay updated on the changes to the tax code. They will use this knowledge to help your business lower its overall tax burden.

Use Contract Employees

Hiring full-time employees can be very expensive. If you want to lower your tax liability, it might be time to entertain the idea of using freelance or contract employees. You can get the same quality of work by hiring freelancers and lowering your tax liability. Using the various online freelance worker forums can help you find motivated individuals to help you out.

As you can see, there are a number of things you can do to prevent having tax debt.

Dragan Sutevski

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan