Tax liability is the sum of what you owe in taxes plus any penalties and interest. It’s important to keep your tax liability as low as possible so that you can save on your overall tax bill. Here are some tips for minimizing your tax liability at your business:
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1. Make sure you are filing the right forms. Depending on your business structure, you may need to file different forms than a sole proprietorship or partnership. Check with your accountant or specialist business tax form library to see which forms are applicable to your business.
2. Keep accurate records. Keep accurate financial records to help you calculate your tax liability and potential penalties and interest charges. This includes a track of income, expenses, and net profits/losses. You may be required to submit these records to the IRS if requested by them.
3. Claim deductions and credits where appropriate. Claiming deductions and credits can reduce the amount of money you owe in taxes. Examples of deductible expenses include advertising costs, employee salaries, and mortgage interest payments for depreciable property used in your business.
Claimable credits include contributions made to qualified charity organizations, depreciation on equipment used in producing taxable income, and investment credits such as the renewable energy credit or employer social security contributions credit.
