This is such a complex area that if you don't have help doing it and have plenty of money and don't care if you pay too much in taxes, then don't read this.
That's not most business people. Every dollar saved is a dollar they can re-invest in their business or report to their stock holders or investors. So in that case, GET A GOOD TAX PROFESSIONAL!
Just because you have a bookkeeper, doesn't mean you are ok. I cannot tell you how many situations I have gone into where a business "thinks" they are covered and I bring in experts and we find large and sometimes small amounts of money that they would not have paid in taxes had we not come in.
Conversely, I've been in situations with highly paid CFOs or independent CPAs who got "just enough" of a chunk of return annually that everyone was complacent and um er--fat and happy. Then, when I was called in for an overall "health check" (in all areas) , when we got to the finances, my independent people found everything from borderline ethical practices to good tax results for the client but horrid advice and practice for the longevity of the company -- and worse. So be sure your Financial Team is in sync and cares about you and your business, holistically.
My main point in this is that this is the perfect time to take your taxes seriously. Consider a second opinion, consider and budget for a health check of your entire organization, including your taxes, operations, inventory management, HR practice, marketing, et al. It will pay for itself over and over again and a good, honest and objective person (like me ;)!) might tell you things you don't like hearing but they want what is best for your business to succeed -- so listen.
Below are some tax tips sourced from many places and people. The advice may or may not apply to your situation but are worth reviewing with your tax person (or second opinion). I must disclaim that I AM NOT a tax expert. I bring in those guns when I'm on an assignment to ensure that my clients are well taken care of.
With that being said, here are some ideas -- again some may apply to you ---some may not --and laws are constantly changing and country laws differ dramatically.
· No-income-tax states - Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. These have lured the likes of Tiger Woods, who reportedly moved to Florida simply to avoid additional tax. While a move may seem like a huge commitment, a move across the border from Oregon to Washington, for example, could mean more than 10% of your pay stays in your wallet.
· Consider incorporating in Delaware – discuss this with your tax accountant
•This one may seem obvious but it is why I STRONGLY recommend that you record your expenses. Claim work related expenses - If you are self-employed, you can deduct allowable expenses from your gross profits before paying tax on the remaining amount. If you work from home you can also claim for a share of heating and lighting and other bills, such as water tax and mortgage interest.
• Give to charity – Not only in this time of need is it the right thing to do but it can be to your advantage. If you review your finances now with your tax professional, they can guide you as to the amount that would benefit you and you still have time to do it! Also, in some countries, there are extra tax advantages for age groups.
• Avoid tax on savings - In some areas, a non-tax payer (like a minor) or an aged person whose income is below the tax threshold, can fill up out a proper form to get interest paid free of tax. Also discuss other tax free savings plans with your banker.
• If you are recently divorced or an empty nester, consider taking on a renter. In some areas, if the annual rent is under a certain amount, you need not declare your income.
• Make a salary sacrifice. - You can voluntarily agree to a salary sacrifice. This tactic means that you want to be paid less but would take the compensation for this by additional contributions to your pension or by tax-free, non-cash benefits, such as childcare vouchers etc. Your tax and national insurance (NI) bill will drop as your gross income is reduced.
• Pension payments - You are eligible to get tax relief by paying into a pension option. Big savings can be made by those who pay income tax at 40 percent during their working lives and then pay tax at a lower rate after they retire.
• Carry forward losses - If you are self-employed you can cut the amount of tax you need to pay by carrying forward losses from previous years. Check on this. Some areas have a longer waiting period than one year.
• Child trust fund - Interest on money in a CTF is tax-free.
• Assets transfer - If a married couple, or civil partners, pay tax at different rates, they can cut their tax bill by transferring ownership of savings and investments.
• Write off anything that helps you make money. Here are a few examples:
1. Transportation expenses (car, fuel, repairs, rentals etc).
2. Office expenses (papers, advertising, staples, books etc).
3. Furniture (filing cabinets, desks, tables etc).
4. Computers, phones, cell phones & other electronic gadgets.
5. Special tools or devices needed.
6. Special equipment.
7. Apparel or uniforms.
8. Food or entertainment.
This list can go on & on if you are a business owner that has spent any expense to incur an income. If you are an employee then you may not be able to write off anything unless let's say you own a home based business. An employee that owns a home based business can then write off expenses but it would be best to consult a professional accountant before attempting to write off anything.
To add some pithiness to this serious topic, here is a short and amusing list of things that some people have written off in the past:
1. Breast implants.
2. Animal depreciation.
3. Cat food.
4. Body oil.
5. Clarinet lessons.
Think Taxes- get your ducks in a row before the end of the year. Even if you report quarterly, take these ideas and discuss them with your tax professional this exercise will empower you to get on top of it.