Tax management has become one of the major concerns for many people, especially when you are running a business. This is mainly because when you are aiming higher to achieve your goals, you don’t want to mess things up. This is true both in terms of financial stability and when it comes time to pay your business taxes. Moreover, all that too-extensive-to-understand paperwork always seems like taking a toll on everything else.
However, all of this doesn’t mean that growing your business alongside being a loyal taxpayer is a distant reality. In fact, it is very much possible to focus on multiple aspects of your money simultaneously without getting yourself in trouble.
All you have to do is opt for smart ways that allow you to track and manage your cash while using the Equifax credit score and being cognizant of your income to get done with matters on time and like a pro.
So, let’s get into this taxation game.
See in Which Category You Fall
It is a general rule of thumb that you must get a piece of in-depth knowledge about what you are heading into before starting something.
The same is the case when it comes to paying your business taxes.
How can you do it all smartly when you are not exactly sure of which category of taxes you fall into? Right?
Therefore, here is some precise yet resourceful information about general types of business taxes:
It refers to the taxes you are supposed to pay when you have a team working under you, or you are an employer in the truest sense. These taxes roughly cover things like employee and employer’s social security and medical tax, federal income tax withholding, etc. In order to pay employment tax, you must provide information related to wages and increments. You must also disclose any other compensation made other than the basic salary.
It basically means filing your annual returns. However, if your business falls into the category of “partnership,” you will need to file an information return instead of an annual one. So, if you are supposed to pay your income taxes, you will be taxed based on what you earn yearly. Such taxes can be withheld from your gross income or salary.
People who work for themselves or freelance for most of their professional commitments are eligible for self-employment tax. It is taxed in line with the social security and Medicare system or net. By paying self-employment taxes, you can reap many benefits, like post-retirement, hospital, health emergency, and so on.
Estimated taxes are just like, “when nothing else works, they come to one’s help.” By this, we simply mean that you have to pay estimated taxes only when the withholding tax isn’t enough. Another situation is when you have income streams other than your current business. For example, these income streams can be interest-based, prizes, awards, capital gains, and the list goes on. Basically, estimated tax covers income, self-employment, and other such taxes.
Are you someone who sells or manufactures certain products (be it digital or non-digital)? Or, someone who receives money based on a certain set of services? If yes, then the excise taxes apply to you. There are different forms, like
You will need to pay keeping in line with the type or level of your excise taxes.
Make Use of E-Services
Now that you have the basic and much-needed info on the type of taxes you might need as a business owner, it’s time to move on to the smart ways to pay your business taxes.
The first one we have here is using e-services.
Businesses and markets are evolving and becoming more dynamic. With this in mind, your tax payments should also keep up. This is where utilizing e-services or opting for e-payments helps you out.
- Instead of standing in long queues and dealing with massive or never-ending paperwork, some of the online services let you pay your taxes on time and without any hassles at all.
- You just need to get the hang of things like putting in your valid information, income details, and everything in between, etc., and you are already good to go!
Keeping in line with that, CRA has also stepped up its game in providing you the ease of paying your taxes online.
Procure Third-Party Service Providers
Speaking of the benefit of ease and comfortable payment processes that come with online services, you must try to touch every aspect that possibly comes under the banner of “e-services.”
We are talking about procuring third-party service providers.
There’s no doubt that you would find your financial institutions or CRA’s online portal helpful when tax season arrives. However, this doesn’t mean you can overlook the importance of third-party service providers the rest of the year.
- Such services take much of your burden off your shoulders,
- They let you know when is the due date near,
- And allow you to process payments beforehand to avoid late payments or fines.
This way, you will be able to work on other important stuff instead of fretting over little things. Also, choosing the best payment process for your business is evident to avoid any further penalties.
Manage Your Day-to-Day Expenses
It’s true that to meet long-term goals, you may focus on some main and important aspects of your business life.
But what about the day-to-day matters? The ones that are surely capable of being a game changer for your financial matters and everything in between?
This is why to maintain a smooth relationship with your taxes, make sure to manage where your daily routine money goes. This can involve keeping a record and tracking your daily expenses. It can also include analyzing how much they add to your “extra spending.”
The reason is that, besides the investments on bigger levels, your money on a basic or small level can also impact your relationship with financial matters.
Simplify Your Financial Management
There are certain decisions you need to take as your business starts to grow, regardless of its speed. One of those decisions includes properly managing every source you are getting your money from. This is very important when it comes to paying your business taxes.
And, to be very honest, it can make or break your whole “paying taxes” game and can easily put you in hot waters with CRA if not done in the right way. Therefore, to avoid such a mess, the best way is to simplify your cash management.
For example, you can separate your personal and professional expenses, separate accounts to keep track of all the related financial matters, and take up fewer offers that you might not need at all.
Make Choices That Allow You to Avoid Taxes
Smartly paying your taxes also means avoiding taxes as much as you can, which you can do through these ways:
Minimizing Taxable Income
Speaking of taxable income, it is simply your gross income that will ultimately be used to finalize your annual income tax. So, minimizing taxable income simply means that you don’t expand your business matters in a direction that costs you more than your earnings and savings are.
This can involve hiring only the team you need, not getting yourself a loan you might not be able to pay in the near future, and carefully taking up the services that might not end up costing you instead of providing you relief, and so on.
Maximizing Tax Deductions & Tax Credits
When you work on minimizing taxable income, don’t forget to maximize tax deductions and the credits you receive from taxes. Yes, that is very much possible. All that can happen by claiming your certain business operating cost deduction.
Here’s the list of which points you can go for:
- Expenses related to starting up your business,
- The gross cost that goes into fulfilling plans like retirement, emergency fund, etc.,
- Some of the expenses that your home office incurs,
- Property taxes,
- The cost that comes with advertising your business on local news sources like radio and newspapers.
Of course, you can pinpoint many others per your business, money, and goals.
Controlling The Timing Of Income & Deductions
The next up we have is controlling the timing of income and deductions. Yes, this can also help you and your business pay taxes smartly. This, however, doesn’t mean concealing your actual income through fraudulent ways.
Instead, it means that you are aware of not taking decisions that might cost you at the time of your tax returns and not for the rest of the year.
Be Smart By Not Owing Any Money to the CRA or IRS
Everyone wants to live a debt-free life, and it doesn’t bother them about their expenses every once in a while, right? Similarly, everyone wants their tax processes to be as smooth as possible.
However, in order to make such dreams come true, there are certain things you need to do. Like, owing little to no money to the CRA at all. This may sound easier said than done, but it is one of the smartest ways to manage and pay your business taxes in today’s ever-advancing world. This simply means that you have to finish the mandatory things first and then move on to the other ones.
- For example, when it comes to managing expenses and leaving zero debt behind,
- You are supposed to be a lot more cognizant of your spending and money-management habits.
First of all, realize the budget you have to manage things like focusing on rigorous business growth, hiring new employees, and all other essential expenses. After that, move on to the next point: paying taxes and managing your spending side by side without pushing yourself into a situation too tricky to work out.
This also involves setting realistic and fact-based goals for your business that result in exponential growth alongside keeping you on the safer side.
Hire Your Family Members
Can hiring your family members help you with smart tax management and payments? Yes & yes.
For this, you will have to pay your family member the required salary that doesn’t fall into the upper category of tax filers but isn’t too low for a person.
Now, you might wonder how this will help you or your business in terms of taxation? Well, here is the answer: when you pay your own family member, this will obviously add to your list of added income taxes.
However, your family member won’t have to pay their side of the tax because they are not eligible to pay taxes yet. So, in one way or another, it is a plus and one of the wisest decisions people make when being smart with their cash management.
Seek Professional Help
Last but surely not least.
Seek professional help in the form of a tax advisor when it feels like things can blow up.
Apart from that, it is important that you involve sane voices when aiming for exponential and stable growth for your business.
Moreover, simple decisions like this can help you a lot in providing better options and directions related to how not to trap yourself in cash management yet deal with it like a pro.
Smart Tips to Paying Your Business Taxes – Summary
It is totally understandable when you want to get things done more efficiently, like paying and managing taxes. However, if you feel like getting help from the right sources isn’t that easy, maybe you are mistaken.
In fact, it has become easily manageable like never before.
All it takes is the use of the right tools and information to get you to your annual financial goal without hurting your expenses and earnings.