Here are seven ways for owners of small businesses to save

money on their taxes.

1. Incorporate Yourself: If you`re still a proprietor or

partner of a business, it`s time to incorporate yourself. Not

only will you limit your liability, but you may enjoy lower tax

rates on small business income and other tax advantages as well.

2. Be Home Based: If possible, continue (or switch to) being a

home based business. Not only will you keep your overhead down,

but you will be able to write-off (or deduct) the business use

of your home.

3. Income Split: Pay reasonable wages to your spouse and

children. In this way, you can legally divert income taxed at

your higher rate to your family members that are in a lower tax

bracket.

4. Rearrange Your Affairs For Maximum Tax Savings: Can you make

some changes to turn your hobby into a moneymaking business? Can

you use that extra room in your house as a home office for your

business? Can you arrange to use your car more for business

purposes? Can you arrange for more of your entertainment

expenses to be business related?

5. Document Your Expenses Well: Do you document your expenses

well so that they would survive a tax audit? Have you kept a

mileage log so that you can prove the percentage business use

you claim for your vehicle? Have you kept receipts for all your

entertainment expenses and listed the business purpose on the

back of each receipt?

6. Be Punctual: File all returns and pay all taxes due (income,

payroll, sales, et cetera) on time. This way, you avoid

expensive late filing (and payment) penalties and interest.

7. Develop a Tax Planning Mindset: Some people only worry about

their taxes during tax season. However, you will save a fortune

in taxes, legally, if you make tax planning your year-round

concern. Do you make business and personal purchases,

investments, and other expenditures with tax savings in mind?