Tax planning strategies for small business owner are needed to avoid late interest and administrative fines. With a smooth business with neat financial reports and tax compliance, clients and business partners are more likely to trust. Moreover, business owners can easily get loans from banks, so here are the strategies that can be applied.

Best Ideas of Tax Planning Strategies for Small Business Owner

• Have Separate Business and Personal Finances

Personal finances should be separated from business finances from the start so that they do not mix and cause chaos. So that you don’t get confused and each finance is clear, accounts should be separated. This also aims to increase the accuracy of tax reporting and financial records so that they are easy to audit.

• Create Financial Records

Every business owner must know how to make neat financial records, even though the business is still relatively small. Every daily income and expense must be recorded, either manually or using accounting software/applications. Financial records can also be done by preparing proof of transactions for tax deductions.

• Prepay Your Expenses

If your small business is doing well, it’s advisable to prepay some of your expenses for the next financial year. These payments could be insurance and rent or other payments. Expenses can be paid in the current year for up to 12 months in advance (the following year). It means this can be deducted from your taxable income for the current year.

Business tax planning strategies include prepaying the expenses but doesn’t apply to payments made more than 12 months in advance. Also, make sure that the payments are reasonable and legitimate business expenses. This prepayment strategy is widely used because it’s beneficial so that business owners don’t suffer tax losses.

• Review Your Debtors

Another tax planning strategy that works well for small business owners who are still growing is to review your debtors. Then proceed to write off any uncollectible debts from your income in the year they are written off. The debts will still be written off in that year even if you don’t collect them in the same year.

• Plan Your Business Expenses Carefully

The amount of tax payments depends on how wisely and well you plan your business expenses. Your tax burden can actually be reduced when you can carefully manage your legitimate business expenses. The expenses refer to the rent and employee salaries to logistics and transportation costs and overall operational costs.

• Hire Family Members

Tax planning strategies business owners should know include how hiring family members can reduce the taxes. Employing your own family members is a good strategy because the salaries paid are considered operating expenses. This results in reduced taxable income and lowers the amount of tax payable.

This strategy also reduces taxes because family members help each other financially in a tax-efficient way. This is even considered legitimate with the money spent for the business as long as the family member actually works. This is beneficial as long as there is proof of salary payments and the amount of salary is considered reasonable.

• Leverage Tax Concessions

This strategy focuses on using tax relief from the government as best as possible when meeting certain requirements. In this case, you must first know what tax facilities apply to your type of business. Fulfill all the specified requirements and report taxes correctly so that the use of incentives is considered valid.

• Consider Health Insurance Premiums

Best tax planning strategies for small business owner include the use of health insurance premiums. It means this strategy focuses on the cost of paying for health insurance that can be deducted from taxable income. When you pay health insurance premiums, the amount paid can be a tax deduction so the tax burden becomes smaller.

• Consult A Tax Planner

Small businesses that are growing with larger turnover should rely on tax consultants or tax planners. The financial and tax arrangements will be increasingly complex, so tax consultants/planners can help you meet your tax obligations. Assistance from a tax planner can often also ease your tax burden legally.

Tax planning strategies for small business owner help to provide legal certainty and security. With a number of strategies above, you can also improve your business finances and cash flow. Cash flow is guaranteed to remain healthy with no major tax surprises at the end of the year.