Taxes can be especially taxing for someone who runs a business. Apart from the grief of paying hard-earned money to the government, it can be especially tedious as higher amount of taxes is generally paid by business entities. Thus, though aren’t any clear cut rules for escaping tax payment altogether, there are certain ways by which you can reduce your payment of tax. This can be especially helpful for small businesses which operate on a limited profit margin.
Ensure that you maintain receipts
Many people who run businesses often ignore the collection of receipts, thinking that the smaller magnitude of works such as parking fee or the delivery fee is inconsequential when it comes to tax payment. However, when you add everything up, you will be surprised to see that the total figure actually comes up to a sizeable amount. If the expenses related to business are filed in a proper manner, it can be a great method of reducing your tax.
Transferring your income
The general law for tax is that the higher your earn, the more tax you pay. Thus, if the entire income is being registered in your name, you are bound to pay more tax. It is also advisable to show your income in the name of your close relatives such partner or children. Spouses and Children generally enjoy concessions on tax rates, so it is advisable to employ this method for tax deduction.
Contract based working process
Legally, if your business contracts a certain type of process to independent contactors who are not the employees of your firm, then the earnings shall not be taxed. Thus, it is always better to hire independent contractors who can do the work. However, be careful while employing this strategy. If the contractors are found to be employees of your organization, you will have to face tax payments as well as certain sanctions in all likelihood.
Many provided to charity is not taxable according to laws. Thus, donation of your generated revenue to charities is one good method of showing lesser taxable income in your balance sheet. However, the catch is that the charity to which the donation is made must be registered in the country. Donations made to unregistered charities shall be taxable as per normal rules and regulations.
Small businesses can use the above mentioned straightforward techniques to pay smaller amount of tax. These methods are simple and involve just the basic adherence of norms.