Tax credits are much welcome, and often invaluable additions to any organization’s finances. A tax credit is the amount of money that taxpayers can subtract from their taxes. They differ from tax deductions and exemptions in that while they reduce the amount of your organization’s taxable income, tax credits reduce the actual amount that you owe the government. This guide contains some of the ways you can reduce the amount of tax that your organization pays. Some of these ways require more planning and execution than others, but they can all save your organization a lot of money in the long run.
Claim Specific Tax Credits Relevant To Your Business And Industry
Some tax credits are general to all businesses and organizations. However, some like the alcohol fuels credit are more industry specific. You should find out what tax credits apply to your specific industry, and take advantage of them. Register Your Business Correctly
Businesses registered as sole proprietorships are subject to different tax laws than those registered as Limited Liability Companies (LLC). Sole proprietors have to pay self-employment taxes that LLCs do not, and as a result, your organization could be paying a lot of unnecessary taxes. Registering your organization as an LLC could mean more for you in tax credit, as well as other tax benefits available to LLCs.
Maximize Your Tax Refunds
While on the subject of saving money through taxes, tax credits are not the only way you can get more back from your taxes. Simple ways to get the most refunds on your taxes include itemizing deductions like charitable contributions, unreimbursed business expenses, and casualty loses. If you’re eligible, you could also take advantage of above the line deductions. Above the line deductions are tax deductions that exclude certain expenses like education expenses from your gross income so that you’re only concerned with your adjusted gross income.
Stay Up To Date On Tax Laws
When you’re out to get as much out of your tax as you possibly can, it’s very important to stay up to date on tax laws. Countries all over the world are constantly updating their laws, making it easier for entrepreneurs and businesses to function and thrive. However, you still have to know about these tax laws if you’re going to take advantage of them. For example, in America, the new tax rate for all seven income brackets was reduced. Little bits of knowledge like this can go a long way for your tax credit.
Avoid Taxing Fees
There’s no point in getting tax credits if your organization is just going to lose them paying fees and penalties. One of the common fees people fall victim for is late filing penalties. Depending on your type of business, you could get severe penalties. For example, C corporations can be subject to late payment penalties on unpaid tax dues, while S corporations are subject based on the number of shareholders as well as unpaid tax dues. Since the penalties can be quite costly, it helps to file your taxes on time even if you’re currently unable to pay.
Source: CEO World