Business Tax Relief Tips

• Knowledge of business tax law can help you save money.money money money image by Arman Zhenikeyev from Fotolia.com
  
  Paying certain business taxes on time can save you money. Many states will reward you with a 3 percent to 5 percent discount for timely payment, according to Financial Web. Some of these taxes may include value-added taxes or state sales taxes. You will also avoid any penalties associated with late payments.
  
  

Subcontractors

• You may want to consider using subcontractors rather than employees for skilled or semi-skilled services. Using subcontractors can shield you from employer paid taxes, such as Social Security and Worker's Compensation Insurance, according to Financial Web.
  
  

Correctly Classify Workers

• You should be sure to correctly classify workers as employees or independent contractors in order to avoid trouble with the IRS. During an audit, if the IRS finds a worker has been misclassified, you may have to pay for deprived employee tax benefits, according Tax Resolution University. The IRS loses over $14 billion per year due to underpaid employer taxes. Some companies may misclassify workers hoping to avoid health insurance and 401K plans. Others may be just ignorant of how to correctly classify workers.
  
  If you have misclassified your worker you may still be relieved of liability for employment tax under Section 530 of the Revenue Act of 1978. The IRS auditor will provide written notice of these provisions. Section 530 terminates business's tax but not worker's employment tax liability. The two requirements for Section 530 are the consistency test and the reasonable basis test.
  
  In order to meet the consistency test you must have treated all workers in similar jobs in the same manner as workers in question, according to the IRS website. The reasonable basis test requires that you treat the worker as a subcontractor due to relying on a court case or ruling supporting your position, a prior IRS audit, a long-standing industry practice, or any other reasonable basis for treating the worker as a subcontractor.
  
  If you are unsure about whether you should classify your worker as an employee or a subcontractor, you can request an IRS opinion on your situation, according to the IRS website. A Form SS-8 may be filled out and sent to the local IRS office.
  
  

Section 179 Deduction

• You should consider leasing rather than buying certain business equipment, because leasing may offer increased tax advantages. Under Section 179 of the IRS Tax Code a small business may deduct the full price of leased or financed equipment, according to Section.org. In some cases the deduction you receive will be more than the total loan or lease payments made for the year. Most equipment will qualify for the Section 179 deduction. However, the equipment must be leased within dollar amounts specified by Section 179.