Tax is one of the unavoidable aspects of doing business and for owners, they can be a double-edged sword. Yes, if managed well then you can save big but a single mistake can grow your taxes so it’s very essential for you to be well aware of tax saving tips. As a business owner, you need to be aware of tax saving strategies so that you know which taxes are to be paid and when. Cutting back and budgeting is not the right way to work on taxes, instead exclusively focus on managing the cash flow and treating your personal finances just like business finances. From the perspective of a Tax Advisor, there are numerous ways to deal with the IRS and its policies. There are various employee policies and tax deferred policies that help you relax on your tax saving and much more. Let’s go through some of the top tax-saving policies.
Here, We Talk About the Standard Tax Saving Plans.
- Plan your retirement: As per the IRS Publication 560, you can get tax reductions and tax avoidance on your income if you have a qualified retirement plan. Also, if you have employees, give them the retirement policies and you can also gain their loyalty along with goodwill in the market. Some of the retirement plans are
- Simplified Employee Pension Plan
- Simple IRA
- 403(b) Plans
One of the examples to save up to $57000 as per IRS in one participant 401(k) plan, you can put away this much amount in total contributions.
- Start a Health Insurance Plan: Popularly known as Triple Tax advantage there is one key to save taxes with health benefits. Withdrawals for qualified medical expenses are tax-free, your contributions over these insurances are called pre-tax and they grow tax-free. The industry trends show that medical costs continue to increase every year. At the same time, the insurance cost is not so high. Sean Moore of Smart College Funding says “I also encourage every business owner to explore utilizing an HSA. As medical costs rise, many businesses look to lower the costs of insurance and then is the right time to capitalize on funds. Instead of giving your employees a raise, which would account for added FICA tax, Income tax and Medicare tax, just give them some health insurance of the same amount which will save both sides from taxes.
- Establish Tax-Friendly Business Structure: The payout structure of your business can impact the overall cash flow and tax management hugely. Consulting a Tax Accounting Consultant while planning the accounts team and flow of money can fix the loopholes which can save huge chunks of dollars. If your business is Limited Liability Company(LLC), you still have to pay all taxes but in some circumstances, you may be able to eliminate the employer half of the two taxes paid. There are such sleek chances of saving your hard earned money from slipping out of your hands into tax. Consulting experts is the best chance to make your accounts process fruitful for you and your business.
- Save taxes with Reimbursement: IRS policies are liberal when it comes to businesses taking extra care of their employees. There are many ways to distribute the monthly or annual salary of your employees which includes commute and food cost also. Often, top managers or employees have to tour or something which accounts for extra spend from them towards the company. Generally, such expenses are added to their income but this does not save taxes. Considering this spent as reimbursement ensures that this amount is tax-free. Yes, Reimbursement is not counted as the salary of an employee and also not included in employees W-2 form saving tax for employers. You can learn more about IRS Accountable plans in 463 Publication.
- Lower Your Income with Tax Credits: The Federal Government wants to let good happen to everyone if that is happening with you. General Business Credits can be taken for hiring employees, initiating nature-friendly projects, employing disabled people and much more. Consult with a professional tax advisor to understand tax on saving techniques under the numerous terms of the General Business Credit system. This tax accounting can reduce your total business income in books and hence tax is saved.
- Defer some expenses and balance the taxes: Working with businesses is obviously unpredictable many times and you can go big some year than the others. Deferring some of the payments or the income to come into next year can reduce your tax burden on a more profitable year. So, every year, at the end of the cycle, calculate your last month bills and payments and decide how much you can save this year. Even after having a BIG year, you can easily balance the taxes with help of an expert Tax Advisor to avail proper tax accounting services.
- The Qualified Business Income Rule: A new law came into effect after 2018 when the Tax Cuts and Jobs Act(TCJA) created the Qualified Income Income(QBI) deduction. Depending on your business structure, if you are sharing your benefits with Shareholders, or your firm is Sole proprietorship, an S corporation, or a partnership then you can avail a 20% tax deduction. There are a lot of terms associated with every Tax Saving process and consulting an expert is the best way to deal with them.
- Leverage Section 179 Benefits: If you are thinking to acquire new equipment or machinery or any asset, then Section 179 is for you. It allows your business to reduce the full purchase price of the asset financed in the tax year. Depending on your overall asset requirements, this heavily reduces your business income and brings the tax down. You can maximize the value of business equipment purchases like this to get additional benefits.
- Save your time and Consult an Expert: Being a business owner and thinking to grow your capital, team and company can consume the bigger part of you. IRS Policies and Tax System are hugely vast in itself and they get more complex after every amendment and change. It’s very tough for a business owner to dig deep in this system and extract tips to save tax. Along with time, it will require utmost concentration because you have to be Legal and Accurate at the end.
One of the primary advantages according to one of the tax consultants Los Angeles is to convey forward losses on business income Business income losses can be brought forward for a consecutive period of 8 years and can be set off against income of one year from now if the equivalent isn’t set off against the current year’s increases.Developing a successful business is a dream of many and nobody would like to spoil the hard work of years. Therefore, consulting a tax advisor becomes the very first step in the Tax Saving Process.
Above given are popular and standard ways to play safe with taxes and feel good after paying them. The IRS Policy changes and Amendments are stressful even for experts of this domain. Also, a Change in Government after Elections signs a major shift towards the system. Keeping up with the laws and regulations is a key step for Entrepreneurs and Business professionals for maintaining a healthy personal and business income.
We don’t want you to get confused or stress over it. Your search or a trustable and expert CFO Consultant is over here. TogetherCFO has created optimized tax structures for personal tax benefits and business tax benefits. After all, It’s your wealth and you deserve to hold the major part of it. We understand the dynamics of the IRS and have created lots of successful case studies. With exclusive and customized tax preparation services in Los Angeles for you, TogetherCFO ensures to save a big chunk of your savings. Our board of advisors is highly professional and hold the expertise that is rare to find. Don’t get frustrated over your tax amounts, just contact us now and feel relieved.