4 Ways to Save on Your Taxes

As we kick off the new financial year, small businesses and enterprises should already be thinking about how to plan their business in order to minimize their tax liability. For many business owners, taxes are a major source of stress and worry, so by starting to plan your tax strategy early in the year, you can ensure that your year end goes smoothly later on. Here are some of the best ways in which you can minimize your tax liability for this financial year.

1. Make employee reimbursements accountable

If you include reimbursements for things like travel, entertainment and sustenance in an accountable format, these will not be treated as additional compensation. This means you can reduce your employment tax liability and your employees will be happy too, because they will not have income included on their own tax forms for the reimbursements they receive. As well as the usual expenses, you can consider including things like employee uniforms, tools and other incidental items.

2. Keep all receipts relating to your car

If you run a car, van or truck for business purposes, you can use the fixed mileage allowance set by the tax authorities to calculate the available write off figure for your use of the car. However, the option to this is that you can offset things like fuel, repairs and maintenance of the vehicle but exclude the mileage calculation. By keeping all your receipts and invoices for money spent on the car, you will be able to make an assessment at the end of the tax year as to which route works best for you. Whichever way you decide to go, you will need well documented records of driving usage including odometer readings and dates, so keep a good record throughout the year to help with end of year calculations. In addition to this deduction, you can deduct payments for parking fees and any toll charges from your taxes, as long as you have kept all the receipts and proof of payment.

3. Employ your kids

If you have children who help out with the business, put them on the payroll. Kids over 16 have a tax free allowance equivalent to that of an adult, and the money you pay them is a tax deductible business expense. As well as benefiting your company financially you will also be able to get work done that needs doing, whilst teaching your children the value of hard work and responsibility.

4. Change your accounting and business type to suit your needs

There are a number of different ways in which companies can account for their businesses. Sole traders may be better off as limited companies, companies that manufacture goods may be able to change the way they account their inventory and small businesses need to consider whether their staff are better off as freelancers, PAYE employees or on short term self employed contracts. To get the inside track on what will work best for your business, it’s a good idea to enlist the support of an accounting professional who will already have a good understanding of tax rules and how businesses can benefit.

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Hiring an Accountant: Questions You Need to Ask

When you’re running your own business, finding the right accountant is imperative. Many people think they can cut costs by managing their finances themselves but this can be risky, as any mistakes can severely affect your business. A proficient accountant doesn’t merely fill out your tax return; they should also offer you sound business advice. That’s why you need to ask the right questions at the very beginning of the hiring process. You need to find out if the CPA has your best interests at heart and if they will offer you more than just doing the paperwork. To help you determine if they’re right for you, here are four important questions to ask.

1. Do I trust them?

This is possibly the most important question because if you don’t, you should probably head for the door! You need to feel comfortable with your accountant, as they’ll be handling something very personal and absolutely vital: your finances. According to sme-blog.com, you should always trust your instincts. An accountant should be an advisor and any sign of being pushy should be a warning. If you have any doubts, you can always ask about their CPA credidentials and licenses, then double check online or with the relevant licencing authorities.

2. Will they show me how to make money?

This is the next most important question. According to BusinessSuccessforLife.com, an accountant should help you reduce expenses and minimise tax, but they should also be able to tell you how to maximise profits and personal wealth. When it comes to business planning, they should be able to think out of the box and offer ways for you to be financially efficient.

3. How much am I going to pay?

Accountants certainly don’t come cheap, but you can avoid a few nasty surprises on their invoice by seeking clarification upfront. According to btkcpa.com, some accountants charge by the hour, some want an overall total payment and others use a combination of both. You also need to find out if they charge for things like phone calls and sending faxes. The more unscrupulous kind will charge an hour’s fee for a five minute phone call. Accounting firm btkcpa.com suggests that in order to reduce fees, you should ask your CPA if you can prepare documents beforehand, as this will save time and money.

4. Will I be dealing with one person?

It’s good to build a solid, long-term relationship with your accountant, so you need to know if you’ll be dealing mainly with them or with multiple people. Larger firms tend to assign a number of people to fill out your tax returns, but btkcpa.com says that, ideally, you just want to deal with one person.

The two of you should work in tandem, with the accountant primarily assisting you to make the best financial decisions while building a good relationship along the way. When you’re hiring an accountant, you should keep these important questions in mind. Discussing them with a potential CPA can spare you many hassles further down the line.

Ang Lloyd writes on behalf of Now Learning, an online education portal that promotes a diverse range of study options in Australia, including business management and accounting courses.