Tax Strategies For Small Business Owners

August 19, 2009 By

Tax time may not come until April 15th for everyone else, but for the average business owner, it comes four times a year in estimated quarterly taxes. For some people, like residents of California, those taxes can be even more burdensome when income is being paid by the states in I.O.U.s. It’s not surprising they want to pay their taxes with the same financial instrument, but that will require legislation that the state is unlikely to pass. What is an honest business owner to do with these types of dilemmas? They try to find loans, like a merchant advance, to pay the taxes, but there are other strategies that can be just as effective, if not more.

Talk To Your Bank

There are specific bank accounts set up to pay business taxes that a bank will give to their business customers. Not all banks offer it, but it comes with no fees and is used as a holding area for monies that can be set aside, to gain interest, before the taxes are due, transferring them from a interest-bearing savings account to a checking when it’s time to pay taxes. You not only have a way to pre-pay those taxes, but the interest alone can help to reduce the tax burden too.

Ask For An Extension

If you’re still short, you can file for an extension to file your taxes. Obviously, you will be assessed penalties on any taxes that you owe, but at least you won’t be in violation of tax laws. You can set up payment plans that work within the business budget, if there has been a sharp downturn in business from the previous year.

Reassess Your Tax Liabilities

It may be you owe less this year, than last year. If your business is making less, or you used much of the income to purchase things that can be deducted off your taxes, you may end up owing far less than you estimated in the previous year. Always reassess your tax liability when changes in the business climate appear on the horizon so that you don’t get caught short or give away too much.

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