Your car gets oil changes and regular maintenance. You visit your doctor and dentist annually. Shouldn’t you also pay the same attention to your small business? Yes, you should. We think a regualar tax checkup for your small business is important and now is the time to do it.
Estimate Your Taxes
Self-employed small business owners are required to pay four quarterly payments based on an estimated required annual payment. Alternatively, self-employed individuals can regularly pay their taxes throughout the year through payroll withholdings. What makes the most financial sense for you one year might change the next. Confused? Let’s work together to determine the best plan for you and your business.
Pay the Proper Amount
You don’t want to underpay your taxes and be hit with penalties. Alternatively, you also don’t want to overpay. While a refund sounds nice, it’s an interest-free loan to the government. They’re happy to take your money. But that money is better served working in your bank account and helping your business grow. Adjust your payroll withholdings as necessary; especially if you have non-wage income (rental income or 1099 income, for example).
Save on Taxes, Save for Retirement
Contributions by you or your spouse to a 401(k) or 403(b) plan will reduce your annual tax liability. Pre-tax contributions can be made regularly throughout the year and max out at $19,500 per person (or $25,000 for those aged 50 plus). Check with your plan sponsor about specific features and limits.
Take Advantage of Lower Rates
Finally, long-term capital gains are taxed at lower rates than your ordinary income. An investment held in a taxable brokerage account can be sold to lower your tax liability this year. This is a conversation you should jointly have with your financial advisor and tax professional.
Counting House Associates works with self-employed business owners, partnerships, and small businesses on tax and business strategies. Get started with your free consultation today.