As a startup business, you cannot afford to lose a cent and you will be needing professional help to manage your finances. Numerous accounting firms can aid in providing financial consultations to guide you on your way towards being a stable business entity. Beyond that, there are other tips and tricks to save up on cash during tax season.
Listed below are 6 tax tips for new startups for newly opened businesses:
1. Deduct your startup expenses
Your startup expenses include everything that you spent before the culmination of your business. As preliminary expenses, you may deduct these from the overall taxable income. This is stated in the Income Tax Act. However, this law states that the preliminary expenses should be deducted equally over 5 years, and not in one bulk nor in unequal amounts. Even if that’s the case, you can at least still deduct a sizeable amount from your taxable income every tax period.
2. Hire a family member
This is one of the most popular ways to reduce tax. Instead of classifying their earnings as employee income, you can categorize it instead under company expenses. When you treat them formally as an employee, you will be required to cover for their worker insurance and benefits. When you hire a relative, you can have an insidious agreement and not cover for the additional expenditures.
3. Take advantage of company depreciation
This, perhaps, is the best methodology to save on tax. All of the purchases in building your company must be made under the company’s name. All the items you buy such as a property or a car must be purchased under the company’s name. You can then get depreciation for these expenses. You will have a different tax rate as indicated in the Income Tax Act of 1961.
4. Donate to charity
Getting involved in contributing to charity gives you tax breaks. Ensure that you perform charitable acts periodically. Also, funnel your donations the organizations that are approved for such deductions. Keep a financial record of any transaction you have done.
5. File your tax reports on time
The companies that diligently pay off their taxes are often provided with the benefit of the ability to carry off losses from your business. If you pay diligently, you can get the benefit of carrying off the losses for a consecutive period of 8 years. This is beneficial because you won’t be overwhelmed to settle off the losses all at once. Doing so might compromise your company’s financial stability.
6. Avail professional help
Get a consultation with an accountant who has specialized in finding loopholes to lessen the amount of taxes you have to pay. Atkinsons Chartered Accountants can help you achieve a lesser tax burden. They will also keep you updated with any fiscal law reformations that the government might suddenly make. They can help you adjust accordingly when this happens. They can also guide you through the complex tax system.
In the business world, being able to save more money means that you have more opportunities to grow as a company. With these tax tips for new startups, your tax burden will be lighter and you will have more chances to stabilize and expand your company.