Tax season can be an overwhelming time for employers and employees. Between managing health care contribution amounts, ensuring timely and accurate filing, and financial planning, tax season can be challenging for business owners to navigate on their own. However, there are several strategies business owners can implement to save time, reduce their tax burden, and maximize savings. Continue reading to discover the different ways you and your employees can save this tax season.
File on time
- One of the easiest ways to save this tax season is by filing your taxes before the deadline. This year’s filing deadline is April 15, 2025. According to the Internal Revenue Service (IRS), for individuals and businesses that fail to file on time, the penalty is five percent of the tax due for each month the return is late. This can accrue up to 25%.
Take advantage of available deductions and credits
- There are several tax deductions and credits that individuals can take advantage of to achieve significant cost savings. A tax deduction allows a person to subtract a specific amount from their income when filing taxes, reducing the overall taxable income. This means that deductions can lower the amount of tax you owe. An example of a deductible expense is student loan interest.
- On the other hand, a tax credit is an amount that you can subtract directly from the taxes you owe, reducing your tax liability and leading to substantial savings. For example, if your income falls under a certain threshold, you may qualify for the Earned Income Tax Credit. Other tax credits available are:
- Work Opportunity Tax Credit (WOTC): This tax credit is available for businesses hiring individuals from targeted groups facing significant barriers to employment. These groups include, but are not limited to, veterans, ex-felons, and others.
- Child Tax Credit: This credit helps families with qualifying children to receive a tax break.
- Small Business Health Care Tax Credit: If you provide health insurance to your employees, you might be eligible for this credit.
Invest in a retirement plan
- Contributing to retirement plans such as 401(k)s, 403(b)s, or traditional IRAs can offer significant tax benefits. Employer contributions are tax-deductible and depending on the type of retirement plan you offer your employees; you may qualify for one or more tax credits for setting up and contributing to the plan.
Invest and offer HSAs and FSAs
- Using Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) is an effective way to reduce health care costs. HSAs allow contributions to grow tax-free, and withdrawals for qualified medical expenses are also tax-free. FSAs enable employees to save pre-tax funds for medical expenses, which helps lower their taxable income and Federal Insurance Contributions Act (FICA) Eligible medical expenses include copayments, deductibles, and certain over-the-counter medications. Additionally, offering HSAs and FSAs can serve as valuable tools for employee retention and recruitment, ultimately saving business owners money in the long run.
Work with a professional employer organization
- As tax forms, deductions, and laws evolve each year, it is becoming increasingly difficult to manage and file taxes as a business owner. Luckily, there are companies called professional employer organizations (PEOs) that can help. When using a PEO, you have access to tax professionals who can help with accurate contribution calculations and filing. PEOs can also help individuals manage their retirement plans and contributions, helping them find the best plan and contribution amount for their financial goals.
How GMS Can Help You This Tax Season
Focusing on tasks like cutting checks, filling out forms, keeping up with regulations, and managing tax deadlines can hinder your business growth. With Group Management Services (GMS), a certified professional employer organization, you can transform how you navigate tax season. By leveraging GMS's advanced technology and the expertise of our seasoned tax professionals, you can save time, energy, and money. Our team ensures precise tax filing and compliance with federal, state, and local tax laws, along with accurate contribution calculations. Avoid the confusion of tax season and potential financial penalties by partnering with GMS.