As the tax season approaches, small business owners will inevitably start thinking about how to lower their business taxes. Whether you have completed a year or are a small business owner, running a successful business takes a lot of planning. As a small business owner, there are trade-offs between marketing strategy, inventory, budget, and taxes. So how do you file small business taxes efficiently? Take a moment to kick off the upcoming tax season by reading these year-end tax tips for small businesses in Dubai. The smoothest tax return will accompany your future.
Year-End Tax Tips for Small Businesses
A small business owner must stay updated with the latest tax laws. In addition, small businesses will be affected by the multiple changes to the federal tax code. So let’s discuss some important things about your taxes for the coming year.
Know your deductions and credits.
Depending on your corporation type, you may be entitled to various tax deductions and tax credits. In addition, self-employed people and small business Dubai owners are often eligible for certain sometimes-overlooked deductions and credits. It’s important to understand these items to maximize your savings.
Don’t wait until the last minute.
All business owners procrastinate at one time or another. “I’ll do it tomorrow” becomes “I’ll do it next week.” Then all of a sudden, you have to scramble at the last minute to get everything you want to be done.
When it arrives at year-end tax planning, the last item you want is to put it off until the last minute. Instead, take your time with tax planning as you prepare to start the new year. The earlier you start, the better time to apply.
To avoid last-minute tax planning, make time each week at the end of the year (for example, every week in December) to sit down and tackle tax planning tasks. You can also set reminders for yourself (for instance, on your phone or calendar) to undo other jobs and take time for year-end tax planning. So mark your calendars and get a head start! Once you know it, tax season will be upon us again.
Beware of Scams
Don’t become a victim of scammers trying to exploit the taxpayers through all sorts of despicable means. Some common IRS scams involve criminals posing as the IRS, while others stem from taxpayers trying to avoid paying. In addition, the IRS publishes an annual blocklist related to taxpayers and tax professionals.
Work with a CPA
Hiring a certified public accountant (CPA) to handle small business taxes can be one of the most innovative steps. CPAs are well-versed in current tax laws and regulations, so you don’t have to worry about missing important details or deadlines. Outsourcing this vital part of your business can save money and allow you to spend time and energy on other important tasks.
Receive bonus consumption
Like many other business owners, you’ve probably already purchased equipment, furniture, and more. Unfortunately, tax rules often require you to decline certain items over their useful life. However, bonus depreciation allows you to write off 100% of these costs on your 2022 return.
If you need help deciding whether to buy new equipment or furniture or upgrade your computer before the end of the year, consider doing so.
Note that not all assets are eligible for additional spending. Therefore, before making any purchases and attempting to claim further depreciation, consult an accountant to ensure you are making the right decision.
Take good notes
With specific tax records, your tax setup will go smoothly. These records can help you calculate estimated taxes. Make sure to record your business expenses, no matter the amount, regularly. Be sure to consider your spending on things like advertising or work-related travel before the end of the quarter or year. Dividing these expenses during tax season will be easier if you keep detailed and accurate records and provide relevant paperwork and receipts.
Maximize your retirement savings.
The most crucial part of building a retirement fund is setting aside a portion of your monthly income to invest. Low bank rates today, combined with inflation, mean your savings won’t be able to buy the same goods and services in the future that you buy today. There are many investment options for planning a retirement in the UAE. Each asset class has its returns and risks, from stocks to structured investment plans (SIPs), mutual funds, and real estate investing.
Expats in the UAE still need to be eligible for pensions, although the law is subject to change. However, many companies have business retirement accounts that will match employee contributions. If this applies to you, please take advantage of this opportunity.
Ask your tax preparer.
To ensure you’re getting around and getting ready for the new year, make time before the end of the year to talk to your accountant or tax preparer.
Tax experts are great resources for Dubai small businesses. They can advise you to help you get a higher tax refund and lower your debt. Not to mention, a tax preparer can help you avoid mistakes on your tax return, saving you headaches and financial problems in the future.
Talk to a tax professional to decide what records you need and estimate your tax liability. Give yourself enough time to meet with a tax preparer and discuss your taxes. Remember, tax professionals are busy at the end of the year, too.
Maximize your discount
Make sure to take favor of all available discounts. When planning your taxes, the first thing to do is review expenses and deductions. This will help you determine your deductible expenses and how much you can deduct. Remember, you can only deduct some of the expenses associated with your business.
For example, if you use the car for both private and corporate use, you can only deduct a portion of the expenses related to your business use. On the other hand, you can deduct some of your rent or mortgage interest if you have a home office. However, accounting software can assist you in keeping track of deductible expenses.
Delay or accelerate revenue
As we all know, income is taxed in the year earned. So, depending on your situation, you can pay higher taxes this year or next. To ease your tax burden this year, defer any income next year. But if you want to lower your taxes next year, withdraw as much of your 2022 income as possible.
Before the year ends, ensure you get all your bills. This could reduce the income you report in 2023, when your income taxes will be higher. It makes sense to defer income if you think you’ll be in the same or lower tax bracket next year.
You don’t want to defer income if it can bring you into a higher tax bracket. If that’s the case, consider accelerating your income this year so you can pay taxes when you’re at a lower level now rather than later when you’re at a higher level.
Hire an accountant to handle the finances for you.
Your current methods may need to get you more. Or you’re looking for a way to simplify your accounts, so you don’t have to do everything yourself. In any case, the end of the year is an excellent time to take stock of your accounting processes.
Should you switch to another process? Compare the following options:
Manually recording transactions can be time-consuming. And it will make your book more error-prone. But it is the cheapest accounting solution. Manually recording transactions may sound appealing if you’re looking to cut costs, but remember that mistakes can be very costly.
Accounting software helps you quickly complete bookkeeping tasks, organize transactions, and calculate account totals without breaking a sweat. Automating your accounting records lets you keep your documents organized and have more time for other business tasks. In addition, you can easily access reports to pass on to your accountant.
Hiring an accountant to do all the bookkeeping is one of the most expensive accounting solutions. You don’t have to worry about managing your finances or making accounting mistakes if you hire an accountant. Your accountant prepares the financial statements and calculates the totals for you. However, remember that these perks can cost you a fortune if you don’t do any day-to-day chores.
Conclusion
It is essential to be proactive in tax planning for your business. Waiting until the last minute to do tax preparation can complicate and limit your money-saving options. Staying abreast of current and future tax changes helps you stay accountable to maximize all tax benefits and run a profitable business.
Tax planning is a vital part of running a small business. Using these strategies, you can reduce your tax liability and preserve more of your hard-earned cash. Stay abreast of the latest tax news to take advantage of any opportunities or reliefs available to your business. Working with a tax professional can help you define tax strategies to reduce your tax liability.