6 Ways to Save Money on Business Tax Preparation

Cut Tax Preparation Expense
Cut Tax Preparation Expense. Colin Anderson / Getty Images

How Can I Save Money on Tax Return Preparation and Keep My Tax Bill Low?

Every business owner wants to save money on tax return preparation and to have the smallest possible tax bill. These tips can help you save your tax preparer time (which translates into money) and increase your accuracy and the number of deductions you claim, which will decrease your tax bill.

Tip #1 - Start Early to Review Your Business Tax Situation

Starting early gives you time to read about deductions (like my comprehensive article on Business Tax Deductions A to Z, for example) and to look for all the deductions you can possibly take.

It isn't too late to start early.

Starting early also means reviewing your financial information on a regular basis - at least quarterly. This review should be done with your tax professional, asking the following questions: 

1. Am I going to have to make estimated payments? Making estimated payments can help you avoid fines and penalties. 

2. What purchases should I make and what should I delay? If you are considering buying 

3. Should I consider ways to minimize taxes? You might want to take advantage of tax deferral strategies like a business (SEP) IRA or other benefit plan. 

4. Should I consider a different business type? This is a more drastic tax-saving strategy that should involve both your attorney and your CPA. For example, if your business is a sole proprietorship, you may decide to form an S corporation. 

Check out my Save on Business Taxes article for a list of ways you can save by starting a retirement plan, hiring employees, and more.

Then get to work documenting these deductions. The more legitimate deductions, the lower your net income and the less tax you will pay.

Tip #2 - Follow Directions, Read the Forms

Unless you have the simplest of business tax returns, you may be able to use a business tax prep software program, or maybe you will need a tax preparer.

But whichever one you chose doesn't mean you can ignore the forms you need to file. Reading through the forms, or looking them up on this site, can help you be prepared and save you from scrambling in April.

For example, if you want to take a home office deduction, read through Form 8829 so you know what information is needed. For corporate forms, read through the list of information you need to prepare form 1120 (corporations) or to prepare Form 1120-S (s corporations). Reading through this list can help you make sure you aren't missing anything.

Tip #3 - Be Organized

The tax documents in a shoebox trick doesn't work with tax preparers. The better you organize your return paperwork, the more quickly and efficiently your tax preparer can work. For example, separate out paperwork on equipment and vehicles you purchased during the year, so your preparer can calculate the depreciation deduction.

Put all home office deductions into a folder, including documentation on direct and indirect costs. Being organized also helps you see what you might have missed.

Tip #4 - File and Pay on Time

You can always save money by filing on time. Late filing penalties eat into any refunds you may receive, and penalties for failing to pay estimated taxes when due are an unnecessary expense.

Get your calendar in order so you don't miss tax deadlines.

If you are having trouble completing your tax return on time, you can get an extension.You will still have to do a rough estimate of the tax owed, because you must pay the tax by the original due date. 

Tip #5 - Give Your Preparer Time to Work

Rushing your tax preparer to get your return done by April 15 (when you brought the paperwork in on April 10) won't win you any friends and it may cause your preparer to miss deductions. If you will have to rush your preparer to get done by April 15, get an estimate on the tax bill, pay the estimated taxes, and file an extension request.

Tip #6 - Check Out Tax Preparation Software

If you have a simple business, you may be able to use tax preparation software to do your business taxes. Several top tax preparation software programs have a combined personal and business return preparation option, so you can do your Schedule C with your personal taxes. They also have software for partnerships, corporations, and S corporations, but these returns are more complicated.