REDUCE YOUR BUSINESS TAXES
You may not know it but you may be overpaying in taxes! Finding opportunities to reduce your business taxes legitimately and keep more of what you earned is probably on your wish list. Unfortunately, many people miss available deductions and put off strategic tax planning until it has cost them thousands of dollars! But it doesn’t have to be that way. Read this educational article to learn how to reduce your business taxes:
1. Keep an eye on your Adjusted Gross Income
Some tax advantages phase out at certain AGI levels. For instance, you can avoid an additional taxes if your AGI doesn’t exceed certain levels. When your income goes up, sit with your tax professional to identify opportunities available to high income earners.
2. Reimburse employee expenses properly
You can reduce your income by deducting employee reimbursable expenses. However, there are specific rules how this can be done. Use an accountable plan that meets the IRS guidelines. This type of plan allows the business to deduct employee expenses without including them on their employees’ W-2. You must follow the rules to legitimately deduct employee expenses on your business taxes.
3. Make intelligent tax elections
In the year where you’ve made considerable profits, you can take advantage of tax breaks that will substantially impact your tax liability by making smart tax elections. For example, you can deduct the full cost newly purchased machinery or equipment up to a specific amount. But if you are just starting out and not profitable, you can simply depreciate these items, which can create better deductible opportunities when they are most valuable .
4. Remember the carryovers
Losses or deductions you can’t fully use in one year, may be used in the future years. Monitor which carryovers you have so you don’t miss on additional deductions. These can include capital losses, donations, business credits, net operating losses.
5. Find tax-free opportunities to take income from your business
Finding ways to take out tax free from your business is almost impossible. So you thought…But few are still available:
- Use tax-free fringe benefits such as medical coverage, automobile use, retirement plans
- Consider borrowing money from your business with interest that meets the IRS minimum set rates. When you need money fast that may be your best bet.
6. Offer employee fringe benefits
Employee motivation can be greatly enhanced while reducing your taxes. You can accomplish this by offering meaningful fringe benefits, which studies have shown make a difference in employee morale and productivity. Some fringe benefits are even exempt from FICA taxes!
7. Do year-end tax planning
You can achieve dramatic benefits but spending an hour consulting with your tax. Establish your tax goals and meet with your tax professional twice a year to monitor your results.
8. Reconsider your business structure
Depending on your business entity, you could be loosing tax dollars. For example, an LLC can elect to be taxed as an S corporation. In this way only salary paid to the LLC owner is subject to FICA taxes. If no such election is made, the LLC owner pays self-employment tax (the equivalent of the employer’s and employee’s share of FICA) on all of the business’ net earnings.
You can reduce your taxes if you are mindful of the tax breaks available to you. It’s up to you to investigate what’s out there and implement them for higher tax savings.