Save Money With These Tax Deduction Tips When Filing Returns

One of the primary goals of a business is to generate profits and increase brand value by maximizing resources. This can be done with proper accounting practices. With proper analysis of liabilities, you can lessen expenses, so they do not drain your finances. Far too often, we see businesses close because of poorly managed accounting and poor finances, with high debt to equity ratios. One such expense that drains your income is taxes.

Taxes are not a fixed cost and are dependent on your gross income. This means that the rate at which you are taxed can vary. High tax rates on top of other expenses can make it difficult for a company to manage its books. After all, no one can escape from paying taxes to the BIR. However, there are legal ways for you to lessen your taxes and ease your burdens this tax season. 

Tax avoidance is the legal solution to proper tax planning. It is entirely different from tax evasion. Tax avoidance means that you would use your tax benefits to lessen taxes on your business. Tax evasion, on the other hand, is the deliberate reduction of tax liability by intentionally understating or omitting values. Tax evasion will result in a major audit with the Oplan Kandado program of the BIR. 

Consider the following tips to legally reduce your tax through proper tax avoidance methods:

1. Keep note of and claim ALL allowable deductions

Allowable deductions, or deductibles, are defined as any needed expense that your business must make in order to create income and sustain operations. This includes all operating and overhead expenses.

Every centavo counts, so record and audit well. At the onset, you should be thoroughly accounting and monitoring your deductibles to ensure that every single peso is accounted for. 

Other deductibles include transportation and accommodation for business trips, ads and promotions, amortization, bad debt, charity contributions, depreciation, director’s fees, fringe benefits, interest, cleaning services, management and consulting fees, rentals, representation, SSS, Philhealth and other contributions, toll fees, and training seminars, among others.

2. Provide your employees with quality medical insurance

Retirement and medical benefits, though covered by Philhealth, can be increased voluntarily. By putting your money in additional health insurance, the government considers the amount deposited as a type of expense, thus, reducing your overall tax. One condition, however, is that the maximum non-taxable amount is 10,000 pesos for health insurance policies. 

While to the government, it may seem as though you are losing money, you are actually saving money by setting aside certain values for emergencies that will benefit you, your team, and your business as well. This is also a perfect method to extend goodwill to your staff. Since it exemplifies that you care about their welfare, it will promote productivity and loyalty. As you can see, this offers exceptional long-term value. Compassion for your team is priceless. 

3. Consider giving charity donations

Charity donations are also considered deductible expenses. Make sure to take careful note of these expenses when you decide to host food drives, donation drives, etc. Apart from lessening your taxes, charity donations are opportunities for you to help and give back to your community. 

Besides, by showing that you are invested in others, you will inspire more clients to support your brand. Furthermore, it will promote your credibility and authority as an honest and trustworthy company. Remember, in marketing; people are more inclined to support and buy from brands they trust. 

4. Diligently and correctly conduct your bookkeeping practices

Tax avoidance first begins with proper bookkeeping. A few missed pesos under expenses can alter the amount of tax you pay to the government; hence, it is important to keep proper documentation of all transactions. While you can do the bookkeeping yourself, you may also hire a bookkeeper or a private accountant to help you with documentation. They are, after all, experts in this field.

If you need help lowering your taxes, give our team a call. We have been serving this niche for over ten years and can help you navigate complex tax laws. Apart from lowering your taxes, we do auditing, provide Business Registration Services, and even payroll services. Call us for a free 30-minute consultation.