9 Top Tax-Saving Strategies for Your Business

Running a business may seem lucrative and satisfying but it does have its own share of expenses.

To begin with, running a business means you have to drain out some part of your share in paying the taxes. The business can be small or big, taxes are a part and parcel of the business world.

While escaping paying the tax is definitely a bad idea and can turn you into a tax defaulter, there are some ways and strategies using which certainly you can save on your taxes. These tax-saving strategies will help you in making the most of your business without having to burn a hole in your pocket.

Given below are some of the top tax-saving strategies that can turn the tables for your business:

1. Think smart, hire unconnected or independent contractors

Running a business involves various people who work for you and help you run your business. Employees are crucial to make your business bloom and be prosperous. It is only natural that you have to shell out a certain amount to pay the employee.

It is also important to consider the payroll taxes in mind when hiring another employee to your business. Payroll taxes are not just another petty tax that one pays and get over with, in fact, payroll taxes are one of the major taxes paid by any business owner.

But why fret over the taxes when you can take an easy way out without worrying much about the payroll taxes. The simplest way to escape the same is by hiring independent contractors instead of going for regular employees. Business owners are exempted from paying payroll taxes if the contractors they hire are unconnected with the company.

Before you pursue the same, you should know about the various rules you need to adhere to before you hire an independent employee. The rules pertain to differentiating between an IC and an employee.

Once you are satisfied that all the rules are followed, you can get exempted from the taxes. This is a good tax-saving strategy for business owners.

2. Retirement Contributions

What is a retirement contribution? A retirement contribution is a contribution paid monetarily to your retirement plan.

Having made the contributions before you file for your taxes works as a counterbalance for your business income and also saves you from paying taxes on the retirement contributions.

If your retirement plan is good enough, then you might even be exempted from paying the taxes even after your retirement. Now that certainly sounds like a great tax-saving strategy, isn’t it?

3. Lower your business income by taking tax credits

Another great way of saving those huge taxes is by way of lowering your business income by taking extra credits that can be used for your business. Tax credits are given by the government to encourage business owners to start their own business or expand it which may also have a positive impact on the employees.

For example, you want to go green or provide family leaves to employees. The tax credit can be also used by them to hire employees, cover their health insurance or modify the business in such a way that it has a great and constructive impact on the employees working in the business or for the society as a whole.

You can always check with your CA to see the logistics behind the loan and be aware of the terms and conditions to see if you qualify for the loan or not. 

4. Bad debts can prove good for you

When you review your business annually, you also review the bad debts that your business operated on. You need to review the customers who are most unlikely to clear your payments and accordingly, you can write off those amounts as bad debts.

Whatever amounts are due by the customers will be deducted from your business income. If your business income is low, then automatically you will save a great deal when paying business taxes.

This is a good tax-saving strategy employed by businesses. Bad debts can also include loans made to clients, vendors, or employees who don’t pay you back.

5. Make a list of all the deductions

This is another great tax-saving strategy for business owners. In order to make good use of your judgment, you need to analyze all the deductions you are eligible for. For this purpose, you would require all the receipts of traveling expenses or regular repair of the wear and tear pertaining to the office equipment.

What you should also know is that the occasional gifts or bonus you give to your employees also counts as deductions and you can very well present them to your CA and make them count as your deductions.

6. Clear your bills

Got outstanding bills?? If you have any bills that are outstanding, clear them before the closing at the end of the year since your bills might sit as the profit money in your bank account.

Profit money involves paying off extra taxes as of January 1st. So why not clear those bills that might make you regret later? Also, seek your CPA’s advice on the matter and act accordingly.

7. Purchase to cut down your tax liability

Another full proof way of cutting down on those massive taxes is by means of purchasing the office equipment well in advance.

Even if you have bought some equipment for the next year, you can go ahead and do the planning well in advance so that your purchases can find a place in the business deductions. Especially, if you have some large deductions to make, you need to strategize to make your purchases count. 

8. Alter your depreciation schedule

When you accelerate your depreciation is directly related to tax deductions. For this, we suggest, taking the help of your CPA.

The calculations can be quite complex and your CPA, being a tax expert cannot just guide you through but also make the work easy by doing the calculations. Your heavy machinery can be worthy of saving you from huge tax deductions if you change your depreciation schedule. 

9. Carbon tax deductions

What is a carbon tax? A carbon tax is a type of tax that is directly put on emissions.

This simply means that all the emitters like the greenhouse gas emitters, used generally by fuel producers or fuel distributors, ought to pay a certain amount for each tonne of carbon dioxide burned to post the consumption and burning of carbon-based fuels.

This is a great strategy used by the government that prevents emitters from adding emissions to the already affected climate.

The carbon tax scheme was introduced earlier this year as a way to encourage Canadians to use less carbon-based products, thereby reducing greenhouse-gas emissions. The industries or housel hold workers tend to emit less as the prices of the taxes go up. Less carbon-heavy practices are adopted by people in order to avoid the carbon tax that can take a toll on their budgets.

When the carbon tax is imposed, it just gives the companies an opportunity to look for better and more innovative ways to look for options that can lower carbon emission. 

The Trudeau government has regulated that most households will receive more money back through the rebates than they pay in carbon tax on things such as gasoline and home-heating fuels.

The rebates are meant to offset the added consumer costs resulting from Ottawa’s carbon tax of $20 per tonne of carbon emitted into the atmosphere for 2019; the tax rises to $30 per tonne in 2020. Saskatchewan will see the biggest drop in rebate, where even the family of four will qualify for the rebate to a total of $809 in 2020, down from $903, which was last year i.e 2019.

So, a massive difference can be easily seen in the tax rebate difference that has come as a sigh of relief for the Canadians. The federal carbon tax began in Ontario, New Brunswick, Saskatchewan, and Manitoba on April 1, 2019. 

The federal government has now reduced the carbon tax rebates. The new rebates will be implemented from the new year in the three provinces that are yet to adopt the carbon pricing model that meets federal requirements.

Even Alberta is added to the list of the provinces where the new reduced carbon reduced rebates will be implemented as the province’s United Conservative party revoked the previous government’s consumer carbon tax.

Conclusion: Tax-saving strategies for your business

Other than the tax-saving strategies, tricks, and tips mentioned above, your CPA is the best person to run to whenever you find yourself surrounded by rough financial tides.

Make smart business choices by using the above tax-saving strategies and you’ll certainly see a much more lucrative and profitable business year ahead of you.