5 Big Tax Saving Strategies for Small Businesses

Hopefully you know it’s almost tax time. But do you know whether your business is set up to take advantage of the tax breaks available to you? Here are five ways you can save money by cutting back your taxable income. It may be too late to implement some of these changes for this tax season, but by looking into these strategies now, you’ll be well prepared by the time next April rolls around.

1)   An employee 401(k) plan – You may think your company is too small to offer a 401(k) retirement investment plan, but in fact, such plans are available even to solo business owners. If you offer a 401(k) plan for employees as well, you’ll be eligible for a $500 tax credit for three years, and plan members can contribute up to $16,500 per year of tax-deferred income ($22,000 for those over 50). For details on setting up a plan, check out the 401(k) Help Center.

2)   A flexible spending account (FSA) – If your company doesn’t have an all-inclusive health plan (or offer health insurance at all), it’s a good idea to provide a medical FSA as an additional benefit. Funds that you deposit into your own and your employees’ FSAs aren’t subject to payroll tax, and can be used toward eligible medical expenses up to an annual $2,500 limit. Other types of FSAs are also available to cover dependent costs such as childcare expenses of up to $5,000 per household. Learn more about available options from the IRS.

3)   The Health Care Tax Credit - As of this year, qualifying small businesses that cover at least 50 percent of the costs for their employees’ health care coverage can claim up to a 35 percent deduction for premiums paid in 2010. Check out the IRS’ fact sheet for more details, and to find out if your business qualifies for the break.

4)   New employee tax credits – Thanks to the HIRE Act, enacted last year, if you hired any previously unemployed workers in 2010, you’re eligible for a 6.2 percent payroll tax exemption for their wages paid between March 19 and December 31, 2010. For workers who stay longer than a year, you’ll also be eligible for up to $1,000 in additional payroll tax credit. Learn more from the IRS.

5)   Employee Stock Ownership Plans (ESOP) – Want to motivate and reward your employees, and save money on taxes? Then consider getting a private valuation of your company and rewarding long-term employees with partial company ownership. Because their stocks are tied to the value of the company, they’ll be motivated to increase the business’ value. ESOP stock contributions are tax-deductible, and the plans offer many other tax incentives. Get the full scoop here.

About Kathryn Hawkins

Kathryn Hawkins is a principal at the content marketing agency Eucalypt Media. She's written about business, marketing, and entrepreneurship for publications including BNET, TheAtlantic.com, Inc.com, and owns and operates the positive news site Gimundo. Follow her on Twitter at @kathrynhawkins.
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1 comments
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Window Replacement Orange County

The choices you make on your 2013/14 federal tax return can have a major impact on your overall tax liability.

In fact, your tax return elections could make the difference between a sizable refund and paying more money to Uncle Sam.

payroll tax preparation
payroll tax preparation

Thanks for sharing tax saving strategies. I have use few of them in my own business. Its a great help.....