Business tax planning

Business Tax Planning 101

The term ‘tax planning’ refers to the process of conducting a business in a way that reduces tax liability. In regular speech, it means finding the right way to pay the government less money. This aspect of business is often overlooked.

That means that businesses are giving more to Uncle Sam than they have to. At Tax Reduction Concierge, we have various tax solutions, including deferred compensation, to help companies reach their potential. Check out our guide on what to do to lower your taxes.

Process Thinking

Doing your taxes is not an event. It is a process. If you wait until the last minute to do your taxes, chances are that you will make a mistake, if not a series of mistakes. There are practices that you can be doing all year round to help lower your tax bill.

There are a few different facts that you need to keep in mind. Your business will have a variety of long term and short term goals. Over the long term, you are going to want to avoid a tax bomb, and over the short term, you are going to need to free up capital. Both of these require a continuous effort.

Deferred Compensation

Such strategies allow a company to put aside a part of an employee’s income so that they receive their salary at a later date. Generally, once someone retires, they move to a lower tax bracket. If they were to receive their deferred compensation at this point, they would pay less. There are qualified and non-qualified deferred action plans. For the most part, qualified deferred compensation plans are more attractive to employees, not employers.

Non-qualified deferred compensation plans may be a preferable alternative. When a deferred compensation plan qualifies for Section 409A, the employee is not taxed on deferred wages at the time. No one has to pay a dime to the government until the wages are withdrawn. You should keep in mind that it does not reduce Social Security nor Medicare taxes.

Non-qualified deferred compensation plans are incredibly useful for high-performing businesses. It allows companies to recruit top-level executives. If you want to reward someone in particular, these plans do not fall under ERISA rules. That means that you can offer it to only a select few people in a company.

Keep Current with Your 1099s and W-2s

By law, you are required to submit all of your 1099s to the IRS by January 31st. Depending on your location, you may also be required to file a 1099-MISC with the state. It is a good idea to have these in order before you send them off. In addition, federal law carefully stipulates that all employers must send employees W-2 statements no matter how much they got paid. Keeping your records straight is crucial.

Consider Credits

Many business owners do not take advantage of all of the tax credits that are out there. For example, doing a cost segregation study may help decrease your burden if you are a commercial property owner. The Research & Experimentation Tax Credit provides a way for businesses to eliminate some of the taxes for R&D. At the local, state, and federal levels, there may be tax deductions associated with hiring people.

Business owners must verify their taxes. We can help guide you, and ensure that you are not paying a cent more than you absolutely have to. Tax Reduction Concierge are tax professionals who are ready to help simplify the complicated. Contact us for more information about what we can do for you.