Five Tips to Maximize Your Business’s Chances of Getting a Tax Refund

Maximizing your refund is the name of the game when you file personal taxes, but did you know you can potentially receive a refund when you file business taxes too?

The plan is always to estimate exactly how much you need to pay in taxes so you don’t overpay, but that doesn’t mean you shouldn’t do everything you can when tax time rolls around to maximize your chances of receiving a refund! Here are a few ways you can increase your chances of getting a little money back from the government that you can turn around and reinvest in your business.

Apply For a Government Program

It’s always worth your time to look into government programs that provide businesses of all types and sizes with tax breaks and incentives.

For example, if you live in Canada, the Canadian Revenue Agency’s Scientific Research and Experimental Development (SR&ED) program is one of the largest federally funded programs in the country. Its purpose is to provide tax incentives to businesses that are working in areas of research and development. If you apply for the credit when you submit your taxes and file the necessary paperwork, you can receive SR&ED refunds for up to five years between audits.

Other government programs are available too, depending on where you live. You could get money for installing certain updates in your business, for making it through the COVID-19 pandemic, and more. It’s always worth your time to check what might be available to your business when tax time rolls around.

Rethink Your Retirement Plan

The government likes to support saving for retirement with tax incentives. Not only will you put aside money that will enable you to retire when the time comes, but you could save on your taxes too!

In order to get the tax savings, you have to choose a plan that is supported by the government. For example, a 401(k) plan that is offered to employees with contributions can provide you with the ability to avoid paying taxes on the amounts you contributed. Other plans may be available, and you may find that you have even more options when it comes to your own personal retirement accounts.

Cash In on Depreciation Deductions

Make a list of everything you have purchased for your business throughout the previous year. Not only might you be able to deduct items as business expenses, you may also be able to file depreciation deductions. This just means that the items you purchase have a usable life, and as that life runs out, you can enjoy more tax benefits that could ultimately result in a refund.

Just a few of the things you may be able claim on your taxes that depreciate in value over time include:

  • Manufacturing machinery
  • Vehicles
  • Office spaces and buildings
  • Computers
  • Office equipment, like printers

Time Income and Expenses

If you are really serious about the possibility of getting a refund on your taxes and you’re willing to put in extra time to strategize with your accountant, you can take advantage of tax benefits when you time your income and expenses.

In its simplest form, this strategy means making payments when tax deductions for those payments are available, and pushing receipts to another year when taxes are lower. In practice, it’s a lot more complicated than it sounds, but when done properly, it could end up saving you a lot of money.

You definitely have to make sure you’re using the right accounting method, and you have to make sure you follow all the rules so you don’t end up getting into trouble. Working with a professional business accountant can really help.

Write Off Bad Debts

Do you have customer accounts that are delinquent? Or maybe you have a customer that hasn’t paid and you’re tired of hounding them? If so, you may be able to write these amounts off as bad debts.

Not only do bad debts include what customers are supposed to pay you, they also include loans you may have given to clients, vendors, or employees who haven’t paid you back. By filing it as a capital loss, you could see some great benefits on your taxes.

Just because tax refunds for businesses isn’t the norm doesn’t mean it isn’t possible! With the right strategies, dedication, and consideration of your business throughout the year, you may be able to find ways to save that will ultimately translate to extra money in your pocket.

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