As a franchise owner, navigating tax season can feel complex with unique expenses and income streams tied to your franchise agreement. But with some proactive steps, you can optimize your tax strategy and potentially save big.
Here are some key tax tips to consider as you wrap up the year:
1. Deduct Franchise Fees
You may be able to deduct initial franchise fees and ongoing royalty payments as business expenses. While upfront fees may need to be spread out over time, royalty fees are usually deductible the year they’re paid. Check with your accountant to handle these deductions properly.
2. Track Marketing Contributions
Most franchises require you to pay marketing or advertising fees. These payments are often tax-deductible, so keep detailed records to claim the tax savings!
3. Check in with your Accountant
To maximize your year-end savings, it’s crucial to stay in regular contact with your accountant.
Make sure they have all the information needed to reconcile your bank, credit card, and loan accounts.
Without this, they can’t provide accurate financial reports, which could impact your tax planning. Clear communication helps keep your records up-to-date and ensures you’re prepared for tax season.
4. Know Your Tax Responsibilities
Did you know? Nearly 40% of small businesses face penalties due to incorrect or late tax filings each year, costing them thousands in fines and interest.
As a franchise owner, navigating tax obligations is crucial to avoid these costly mistakes. Our tax planning and preparation services ensure you’re compliant and maximizing any available benefits!
Our accountants can also help you forecast and manage cash flow, ensuring you have the necessary funds to cover expenses, invest in growth, and weather financial challenges.
5. Leverage Depreciation on Equipment and Assets
If you’ve bought equipment, signage, or furniture for your franchise, you can likely claim depreciation over time or use Section 179 to deduct larger amounts upfront on qualifying purchases.
6. Take Advantage of the Qualified Business Income (QBI) Deduction
Franchise owners might qualify for a 20% QBI deduction, which lets you deduct up to 20% of your qualified business income. If your franchise is set up as a pass-through entity (like an LLC, S-Corp, or sole proprietorship), this can be a big tax saver.
7. Employee Tax Credits
Look into tax credits for hiring employees. Programs like the Work Opportunity Tax Credit (WOTC) can offer big savings if you hire from certain groups, like veterans or those from disadvantaged backgrounds.
8. Plan for State and Local Taxes
Franchise owners may face state and local taxes based on their business location. Stay up to date on franchise taxes, sales tax, and local business taxes, as they can vary widely. Consult a tax professional to avoid any surprises.
9. Home Office Deduction (If Applicable)
If you run your franchise from a home office, you might be able to deduct related expenses. Just make sure the space is used exclusively for business to qualify.
10. Partner with a Franchise-Savvy Accountant
Franchise accounting is unique, so it’s essential to work with an accountant who understands the specific needs of franchise owners.
At Franchise Resource, we specialize in helping franchisees navigate their taxes to maximize deductions and minimize their liability.
Franchise Accounting You Can Count On
Based in Omaha, Nebraska since 2013, we have been providing professional and reliable bookkeeping services for franchise owners.
Our bookkeeping services are designed to make your life easier so that you can focus on what you do best!
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