Many business owners know that it’s not about how much money they earn, but how much they keep after paying all their business expenses. Now that tax season is over, evaluate your business’s tax situation to see whether you’re getting the most out of your deductions.
Failing to manage your taxes properly could ultimately mean trouble for your business. If you wait too long to make a change, some consequences may become irreversible. Fortunately, you don’t have to wait until tax season to get started. You can manage and adapt your business tax strategy any time of the year. It’s never too late to review, evaluate, and make changes to your business tax approach.
Business Tax Professionals at Waters Hardy
5 Ways to Launch Your Business Tax Plan
1. Contribute to Retirement Plans
It is a wise decision to save for retirement. Setting up qualified retirement plans such as an IRA, 401(k), or 403(b) for yourself and/or your employees can save you money on taxes. The company’s contributions are deductible as a business expense. However, employee contributions are deducted on individual tax returns.
Let’s explore a few options for executing this strategy.
SIMPLE IRA: Savings Incentive Match Plan/Individual Retirement Account. As an employer, you can require a 2% contribution from employee paychecks to their retirement fund or offer an employer match up to 3%. Employees can contribute $13,500 per year (and an additional $3,000 for employees over the age of 50).
Roth IRA: Individual Retirement Account allowing for tax-free qualified withdrawals. These savings accounts are preferable for those making less than $140,000 annually and who think taxes will be higher for them in the future. The money is taxed when it goes into the account but can be withdrawn tax-free. However, the employer match is pre-tax money.
403(b): A retirement account for certain non-profit and public school employees. Like other retirement plans, employers can match employee contributions pre-taxes and can maximize benefits if employees stay for 15 years of employment.
Simplified Employee Pension Plan (SEP): A retirement account with higher contribution limits available for self-employed individuals. A simplified retirement account that provides employers tax-free contributions as well as a tax credit when initiating the plan.
2. Focus on Increasing Employee Benefits
One tax-efficient way to attract and retain employees while lowering your tax bill at the same time is to offer new or expanded employee benefits. Salary raises might seem like the right thing to do. However, you’re actually better off contributing more to your employees’ healthcare. A raise is taxed on both the employer’s side and on the employee’s side as part of their income.
- Health Savings Account
One great way to save tax-free money for health and wellness spending is by creating a Health Savings Account (HSA) plan for your employees. Not only is this a way to put aside money for future healthcare needs and save on future health costs, but by implementing a HSA plan, your business can reduce taxes. Contributions are tax-free, growth is tax-free, and withdrawals for medical expenses are also tax-free. Covering more of your employee health insurance costs without paying any taxes is a win-win plan.
3. Reevaluate your Business Structure
One commonly overlooked tax-saving strategy is to structure your business the proper way. Structuring your company as a C corporation, for example, changes the first $50,000 of your income from a 35% tax rate to a 15% tax rate. That’s a significant amount of money you could otherwise use to put back into your business.
4. Deduct Assets to Charity
Donating and deducting assets to charity is another efficient way to save on taxes. You can deduct up to 25% of your taxable income in charitable donations. Moreover, this is a great way to pay it forward, build a positive reputation, and reduce your tax liability all at the same time.
5. Hire a Reputable Tax Professional
The majority of business owners agree that the cost of hiring a professional tax consultant is much less than the money you can save by using their accounting services. There are two significant benefits of consulting expert accounting companies.
Stay current on tax law
- There are many laws and unique circumstances associated with business taxes, and you could easily overlook something important. In addition, tax law is constantly changing, and the way you completed your taxes last year might not work this year. Taxing professionals know how important this is and have made it their business to stay updated on all current tax planning and compliance regulations.
- There are many write-offs you may not be aware of that could significantly lower your tax bill. To deduct your expenses correctly and apply for tax credits, you’ll need to be an organized record keeper. This can be complex, but professional tax companies can help you understand exactly what you can deduct in business expenses.
Team with Waters Hardy and Start Saving Today
Every business is unique, and to minimize the amount of taxes you pay, you need to know all the ways the IRS has allowed tax relief to business owners. This takes a lot of time, so hiring an expert team of tax consultants can benefit your company in many ways. Hiring a tax professional with a trained eye and extensive tax knowledge is a worthwhile investment.
Whether you need a complete tax assessment and plan or a second opinion, Waters Hardy is the expert tax team that you can trust. Our business is to ensure your business thrives, and executing a smart tax strategy for your business is the key. Let’s partner up today and start maximizing your business tax benefits.