Tax Tips for Small Business OwnersPosted on October 8th, 2018
Every year, investigative tax notices are mailed to small business owners. While these are not always official audits, they raise a red flag, and proprietors should know how to prevent and address these inquiries in turn. This list addresses the best tax practices for small businesses to keep them abreast of tax changes and trends, and away from IRS scrutiny.
List of top 15 Best Tax Practice Tips for Entrepreneurs 1. Maintain thorough and separate records of employees and contractors.
2. If you set up any location based business, even temporarily, keep records of all expenditures and educate yourself on the local tax laws.
3. Use a tax software accounting system – this can help you develop appropriate reports at tax time and can alert you of changing tax rules.
4. If you hire a tax accountant make sure they have experience with taxes as they relate to your specific business.
5. Keep records—including serial numbers and detailed receipts—for all business equipment, office machines, and vehicles.
6. Don’t use funds that are earmarked for taxes as a means to tide your business over in hard times. This will result in a worse financial crunch come tax time and if you can’t pay, you risk the loss of your tax ID.
7. Educate yourself on the correct way to estimate your taxes – This may be overwhelming and a tax professional is highly recommended for small business owners.
8. Determine an appropriate fiscal year so that you can plan better for tax time: A fiscal year refers to an accounting year that does not end on December 31.
9. Tax records should be kept for a minimum of three years – unless related to property and depreciation. In that case, tax records should be kept for three years past the time ownership ends.
10. Keep detailed records on business vehicles’ usage – both on the job and off.
11. When operating on foreign soil and dealing with other currencies and tax laws, be sure your tax professional is vigilant in obeying the new rules on foreign bank accounts enacted in the Foreign Account Tax Compliance Act, or FATCA.
12. Work with your tax professional to determine whether you should operate as a partnership, an S corporation, an LLC, or a sole proprietorship.
13. Become familiar with your requirements in regards to the Affordable Care Act.
14. If you are not able to pay taxes owed to the IRS, or another tax agency, contact your tax professional right away. There are appropriate steps that can be taken and ignoring it only makes it worse.
15. If you are paid in cash – that payment is taxable. The IRS has sophisticated technology to track spending habits and bank accounts to build their case. Let the experts handle your taxes for you. It is usually a mistake for a business owner to complete their own taxes, and doing so can distract you from making your company a success.
Reducing Tax Liabilities for High Income EarnersPosted on July 2nd, 2018
Preparing for end-of-the-year taxes can be daunting, but understanding good tax-planning practices can help to increase your chances of receiving higher returns on your investments. Income from investments can be one of the best places to look when searching for places to cut costs and increase your revenue. Creating a proactive tax-plan can prevent you from paying thousands of dollars in unnecessary taxes.
While high-income taxpayers are required to pay the most income tax, there are a few practices these individuals can engage in to lower the amount they pay at the end of the year. Purchasing stock for at least one year prevents you from paying additional costs from unnecessary taxes. Allowing your stock to become eligible for long-term treatment helps to reduce the amount you pay in taxes. Failing to hold stock for at least a year causes you to pay short-term capital gains on investments rather than just the 15 to 20 percent of normal capital gains tax, in short paying more.
Regular reviews of your taxable assets make sure you’re aware of all the areas that may be costing you extra money. Routine checks develop good practices and habits that help to reduce what you pay. Reduce the amount of taxable interest, which means reducing the amount of money stored in low-profit areas. Banks give their clients close to nothing, while clients are still required to pay at least half of that interest in taxes.
Utilizing high-profitable places to store your money will not only increase your dividends but also reduce the amount of taxes you pay. Give away assets, that is, giving or donating assets to charities and family members using appreciated stock, may reduce the amount of taxable income you own. Neither party associated in the exchange is required to pay capital-gains taxes when the stock is transferred. Additionally, family members may qualify for a different tax bracket that are lower than your costs, in turn reducing the overall amount of gains lost through the process. Since the New Year is just around the corner, it’s best to engage in proper tax-planning practices to best increase your chances for reducing the amount of money you pay and increase the amount of profit you actually keep.
Tax Planning- Why and How- Proactive Tax PlanningPosted on February 7th, 2018
Many business owners and taxpayers are accustomed to the idea of “reactive” taxes. In this style of filing, you make your various expenditures throughout the year, see your company’s sales and expenses, and determine how much you owe at the end of the year. However, this form of filing often leads to business owners owing more in taxes. As a result, many accountants work with businesses to curb the amount you would owe during tax season.
Why engage in Proactive Planning? Proactive tax planning allows a business owner to limit tax liability by working within the various state and federal tax laws. Not only does this approach save business owners money, but allows your accountant more time in finding the best deductions and tax credits each year. The tax landscape is always changing, and implementing an effective tax plan can also help to ensure that your business’ books are kept up to date. This continuous knowledge of the state of your business and the developing tax laws can also help you find beneficial reductions to how much you need to pay.
Business owners looking to expand, incorporate, or otherwise change their business model during the year are especially well served by an adaptive tax plan. This way, you will be able to account for the change in your company and can have a strategy in place to mitigate the corresponding differences in the tax code. How to start your Proactive Tax Plan The first step in planning for the upcoming tax season is to find an experienced accountant or CPA. Hiring a professional will allow you to keep your attention on your business ventures, without needing to focus too much on current tax laws. Additionally, when creating your tax plan, it is always beneficial to allow your tax professional to assess the current state of your company to strategize a savings plan. If you have questions about tax planning or are looking for a strategy that is tailored to your specific income or business, contact our firm today.