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small business tax strategies

5 Small Business Tax Strategies for 2020

February 25th, 2020

Small business tax strategies are best executed throughout the year, not rushed through during the final few months.

Small businesses have plenty on their plates already, of course. Chasing down leads, finding new funding, trying to make that next great hire – there are dozens of tasks that would appear to be higher priorities than thinking about this year’s taxes. Heck, many small business owners are still wrapping their heads around tax preparation for last year’s taxes.

But a few hours dedicated to a full-year tax strategy now will not only save you time and hassle next year – it’s sure to impact the bottom line, too.

The following are a few easy-to-understand tax strategies that you should be aware of so you can wring as much benefit out of them as possible this year.

5 Tax Strategies to Consider in 2020

  1. Dozens of Tax Credits. The IRS classifies quite literally dozens of tax credits under the umbrella “general business credit” – but they include a wide array of credits that deal with making improvements or purchasing equipment for your company, the type of business you engage in and even what populations of Americans you employ. These range from the Work Opportunity Credit to the Indian Employment Credit to the Biodiesel and Renewable Diesel Fuels Credit. In several cases, the credits are tied to purchases or other business expenses that you’ll want time to consider, plan for and implement – making now the best time to start examining them, not a month before the end of the year. You can find a full list, including forms, on IRS.gov.
  2. Save Healthcare Funds. Health Savings Accounts are something of a tax dynamo, in that they avoid taxes on three different fronts: You make contributions before taxes are taken out, those contributions are allowed to grow tax-free, and withdrawals aren’t taxed if they’re made for qualified medical expenses. Not bad. While HSAs often are offered through the likes of Optum and HealthEquity, you can set up Health Savings Accounts with regular banks like Bank of America or Fifth Third.
  3. Hire a Freelancer/Contract for That One-Off Project. Do you have a job that needs to get done relatively quickly, but you either have no staff or don’t have staffers who are suited to the task? Don’t overextend yourself by hiring a full-timer that you can’t keep busy once the project is complete; look for an independent contractor. Contract/freelance labor is actually a deductible business expense. Just remember: You’ll need to issue a 1099-MISC to any contractors or freelancers that you paid $600 or more in a given year.
  4. Invest in Equipment/Hardware/Software. Every business has some necessary tools of the trade. Retailers need point-of-sale systems. Many back offices need printers and paper. Restaurants need chairs for patrons to sit in while they eat. These necessities – and so many more – are tax-deductible. In some cases, you’ll deduct the expenses in full for that particular year, though some equipment purchases can be depreciated over a seven-year span. Better still, you can even write off the cost of repairs to your office space and equipment.
  5. Consult With a Small Business Tax Expert. This list represents just a handful of the ways you can lessen your tax burden in the year(s) to come. The truth is, your small business tax strategy is going to be just as unique as your company – your size, your type of business, your location and so much more play integral roles in what deductions and credits you can harvest. No one will know that better than a small business tax specialist. (And if you’re a sole proprietor, you even get to write off some tax prep costs!)

McManamon & Co. offers expert tax advice with a keen focus on small and midsize businesses. We get to know our clients and their companies, then put that knowledge to work in cracking the wide array of deductions and credits the IRS has stuffed into its tax code. As the relationship grows over time, so too does the value we can add – and often, the profits we can help you preserve.

Even if you still have to knock out last year’s tax prep, don’t wait to position your company for all the tax breaks you can reap this year. Give us a call at 440-892-9088 or contact us online, and let us provide you with more information about our small business tax services.

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