What Can You Do To Put The Tax System To Work For Your Small Business?

If you've recently taken the plunge into entrepreneurship by starting your own small business, you're likely still dealing with a wide variety of organizational matters while trying to keep your daily overhead as low as possible. Fortunately, there are some tax savings to be had for the small business owner that aren't always available to those whose businesses are larger or more lucrative. Read on to learn more about some tax tips and tricks for those who own a small business.

Invest in energy-efficient equipment for a hefty federal tax deduction

For businesses that need a bit of refurbishing to get into show-ready condition, you can have your purchases do double duty by investing in "green" technology or energy-efficient appliances or even windows. Businesses that are somewhat inefficient have a fairly low threshold, and those that reduce their heating or cooling costs by 50 percent or more are eligible for a deduction of 60 cents per square foot of their business's space. Other energy-efficient improvements can constitute deductible expenses, reducing the amount of your business's gross income subject to tax.

Keep a careful eye on withheld employee payments

If your business withholds a portion of employee salaries for payment of health insurance premiums, retirement contributions, or Social Security taxes, it's crucial to keep this money segregated from any of your operating funds. It can be tempting to dip into these funds, especially if you're confident you'll be able to replenish them before any discrepancy is noticed, but doing so could subject you to some major civil fines and penalties in addition to any cause of action for mismanagement of your employee's funds. By keeping them in a separate account, you'll be able to remove much of the temptation inherent in having access to these funds.

Plan your estimated taxes early

Little can be as frustrating as paying a penalty or late fee for a bill you didn't realize you owed, and estimated business taxes are no exception. It's important to stay on top of your business's projected and actual receipts and expenditures throughout the year, otherwise it can be difficult to determine an accurate tax liability and ensure you pay enough in quarterly estimated taxes to avoid owing an underpayment penalty. In some cases, enlisting the assistance of an accountant who can do these calculations on your behalf and prompt you when you need to write a check (or make an electronic transfer) to the IRS can be money well spent when it comes to avoiding IRS trouble.