Small Business Tax Planning Tips for the 2024 Tax Season

Small business tax planning can cause a headache. If this is your first year preparing for small business tax filing, you may be looking for tips on small business taxes for beginners. Perhaps you have owned your business for years, but you still need some helpful small business tax advice. Even if you have a small business tax deductions checklist on hand, rules and exemptions can change and leave you wondering what to do next. Below are some tips so you can better prepare your taxes, regardless of if you are a beginner or a veteran.

How are small business taxes different than what you’re used to?

Personal Income tax is a direct tax that you, as a working individual, pay to the US and maybe a State Government. Personal tax is calculated from your monthly wages and salaries.

As a business owner, you pay a different kind of tax called corporate or company tax, which is subtracted from the gross income that your business has collected in a particular business period. Corporate tax is a direct tax that you pay to the government based on your earnings. The United States uses collected corporate taxes as a source of income to pay for projects that are meant to benefit citizens and improve the country’s economy.

How to start small business tax planning

It's important to have small business tax strategies in place so you can get the most out of your hard-earned money each year. Fortunately, there are quite a few ways to save on taxes for small businesses.

• Start planning your finances as soon as possible so you can be the most prepared for the next tax season.
• Keep careful track of your receipts and business expenses. You can do this via paperwork, but several helpful software programs exist that can simplify the process.
• Consider applying to make your small business a Limited Liability Company (LLC). The tax advantages of LLC status include the ability to tax your business income on a personal income tax rate, as well as the chance to save on taxes like Medicare and Social Security.
• Traveling for work this year? Remember to track your mileage, gas, and other costs so you can deduct these as business expenses when tax season rolls around.

It’s never too early to start planning your small business finances for the upcoming tax season.

How much do small businesses pay in taxes?

The corporate tax rate is 21%, so if you've set up your business as a corporation, expect to pay this percentage.Do you have an S corporation, a partnership, or a sole proprietorship business structure? These are considered “pass-through” entities, meaning that they're taxed at your personal tax rate as the owner. This could range between 10% to 37%.If you have organized your business as an LLC, you can choose whether you want to pay taxes as a pass-through entity or as a corporation, depending on which tax rate best benefits your business.

Tax strategies for small business owners

As you prepare to pay your taxes, you have several options to decrease the amount of your hard-earned income that you must hand over:

1. Deduct, deduct, deduct! Consider all the things you spend money on that could count as business expenses. If you work out of your home, don’t assume that this limits your business expenses. Do some research and find out all the options that you can deduct as official expenses.
2. Lend a helping hand to your employees with their student loans. You could get a payroll tax exemption as a result of your good deed!
3. Need to buy some business items? Wait until the end of the year to make purchases. Buying new or even used business assets can reduce your taxes if you've already estimated your business taxes for the year.
4. Offer your employees fringe benefits, as these can be tax-exempt. These include benefits like medical and dental insurance, disability insurance, childcare assistance, and even meals. This way, you can pay your employees what they deserve without triggering higher employment tax costs.
5. Customers not paying what they owe is annoying—but it may help you when tax season rolls around. Loans or sales you have made to others, without receiving payment in due time, can be written off as bad debt and can help reduce your overall tax payment.
6. Keep up with your own debt payments! You can deduct the interest of your fulfilled loan payments from your taxes.

Taxes checklist

Here is a general overview of the tools and resources you’ll want on hand and steps you’ll need to follow as you prepare your business taxes.

• Receipts from provided services and fulfilled sales
• Records of returns
• Income like rental income or refunds from the government
• Inventory purchases and total amount spent on inventory
• Business supplies
• Expenses like business phone lines, transportation, internet, advertising, contract labor, insurance, employee wages, and in-home office expenses
• Completed books from the end of the year
• Receipts from charitable donations you made during the year
• Records of your filed taxes from previous years

Ways to save on taxes for small business owners

Knowing the legal ins and outs of taxes for small businesses can be complicated, especially when you're trying to balance your business on top of all that. That’s why LegalShield offers Small Business Legal Plans to provide you resources that may help guide you through various legal issues that you may face as a business owner.

We provide access to a provider law firm in your state to assist your business with a wide variety of business-related legal matters for a monthly subscription cost. They can help you review a certain number of business legal documents per year, as well as write a certain amount of collection letters for your business each month. All this and more is available with the help of LegalShield!‍

Do you need help answering difficult legal questions about your business? LegalShield's Small Business Plan connects you to an experienced law firm that can give you the advice you need.