Tax Relief Blog
With more than 30 million small businesses in the US, effective tax planning is essential to maximizing profits and minimizing taxes, keeping more of what is earned, and lowering your taxes for the future. Understanding the intricacies of effective tax planning takes professional guidance to ensure that you are taking advantage of every opportunity. But there are some basic techniques that can be used to help lower you tax burden and maximizing profits coming into your business while reducing expenses.
Employee Benefits: These are mostly the incentives used to keep valuable employees. Such benefits include health insurance, contributions to life, long-term care, and disability insurance. And you may even include assistance for tuition, childcare, transportation, and even what you use for the cafeteria in your company.
If a program is designed to benefit employees, it may be tax-deductible which only maximizes profits by providing additional deductions.
Health Savings Account: For businesses that have a high deductible for their health insurance, health savings accounts (HSAs) may be quite advantageous. You can contribute to HSAs from your current income. And the account itself will continue to grow tax-free. Plus, qualified health expenses can be taken tax-free as well. This is a win-win for employers who have health insurance with high deductibles. Plus, it provides a way to lower tax burdens which maximize profits, especially for smaller businesses.
Get a free evaluation by calling us today at 1-877-788-2937.
Location, Location, Location: The mantra of purchasing a home also applies to the state in which your business is located. You should look at the tax expenses of your state and consider other options if they provide for a better business environment.
- No Individual or Corporate Income Tax: Nevada, South Dakota, and Wyoming
- No State Sales or Individual Income Tax: Alaska
- No State Sales Tax: Montana, New Hampshire, and Oregon
There are also states with business-friendly tax structures such as Tennessee, Texas, and Washington. Look over the options and consider moving your business to one of the aforementioned states to help maximize profits and lower your tax burden.
What follows are a few common methods used by Los Angeles and all over America business owners to manipulate taxes in a legal way which lowers the burden of what is being paid while maximize profits and minimize taxes.
Deferring Income: You only pay taxes on the income that you receive in a calendar year. If you delay sending out invoices from the fourth quarter to the first quarter of the following year, you will lower the amount of income for the current year. Plus, your deductible expenses are now being applied to a lesser amount, so you will keep more of your earnings.
However, there are exceptions. Such as if your personal income may be significantly higher next year, you may save on taxes by getting more of it coming in now. In all cases, consult with your tax professional to find the best method that works for you.
Depreciation: Many of the assets of your Los Angles small business will depreciate over time, particularly the following.
- Computers & Software
- Equipment & Machinery
- Furniture & Building Improvements
- Vehicles and More
The 2017 Tax Cut & Jobs Act allows for businesses to depreciate 100% of property that qualifies up to $1 million. The first-year depreciation bonus may allow a small business to deduct the full purchase price for qualified property. This may maximize profits; minimize taxes for the year depending on what was purchased. However, you will need to consult with a tax professional before making such a purchase to see what qualifies. Plus, this bonus depreciation is set to run out in 2023.
Qualified Business Income Deduction: For certain types of businesses, such as single-member LLCs, S corporations, and sole proprietorships, the 2017 Tax Cut & Jobs Act provides for deduction of up to 20%. This deduction does not apply to C corporations such as Amazon for example.
There are other qualifications as well, such as the size and type of your business. In this regard, many service companies may not qualify under the law. Plus, the deduction will expire in 2025. So, you should talk to your tax advisor to see how you can maximize profits and lower what you owe to the government if this deduction applies to your business.
Retirement Funding: Your retirement plan may offer tax savings for your business as well as individuals. By setting up a 401(k) and contributing up to 25% of the employee’s salary, you can help your business save money. Plus, if you are a sole proprietor, you can put up to 20% of what you earn into a SEP-IRA account which is tax deferred.
You may save even more money while maximizing profits, minimize taxes by setting up a defined benefit plan which is must like a standard pension. You can put considerably more in contributions into such a plan, but they are complicated to set up. You will need a tax professional or accountant to help you with this process. Plus, they may not be right for your business, so you will need to consider all options first.
The Value of Expert Advice
Although it may be tempting to handle the tax burden yourself, for most business owners the right option is to seek out advice from the tax experts. The reasons are simple, but straightforward. The ever-changing tax guidelines present a myriad of difficulties for most Los Angeles business owners who cannot keep up with what is happening.
For those interested in reducing their tax burden while maximizing profits, the challenges can be so much that many business owners will either make crucial mistakes or not take advantage of deductions at all. The result is paying far more than you should all because you didn’t get the proper guidance. That is where a tax professional can help.
By explaining the current tax rules and regulations, they can spot deductions, use proven techniques to lower your tax burden, and increase your bottom line. Proper tax strategies can help maximize profits for businesses of all sizes. Knowing what techniques to use will depend on having the proper tax professionals to provide guidance.
Get a free evaluation by calling us today at 1-877-788-2937.
