What to do to Make the Most of Your Tax Dollars
We're more than half way through 2014: Where does your business stand in relations to taxes?
Last week, a client of mine had an awful bombshell when I completed his tax form and disclosed he owed a lot of money to the Internal Revenue Service. His first reaction was to be mad at the mediator. Even so, upon careful reflection, he explained, "Well, I should have come to see you last year when my new product took off the way it did. I knew I was making a lot more money." He's right. Any time there is a considerable adjustment to your business's bottom line (in either red or black), it's time for a visit to your tax pro. In fact, everyone who operates a small business should take advantage of the mid-year off season to sit down with a tax professional to talk about their financial statements and probable tax liabilities. It's infinitely easier to create and put a strategy in place today than to run around at year end overturning pails of water on all the tiny fires that have been brewing all year. Here are some methods to go over with your tax pro to enrich your tax situation and ideally keep working capital in your bank account rather than in Uncle Sam's pocket:.
Start a retirement plan.
If you're finally a few dollars ahead and do not have a retirement fund, now's the time to open one. Here's the bonus: it's deductible!
Talk with a dermine what kind of plan best suits your needs.
There are a broad range of mechanisms from Individual 401(k) plans to SEP IRAs to EASY plans that may or may not require you to include employees in the plan.
If a plan entails employee participation, do not rapidly dismiss it.
Opening a retirement plan for your workforces could be a significant way to give raises that don't require the extra cost of employer paid payroll taxes. Read IRS Publication 560 for more information.
Evaluate your legal structure.
Take the time to look at whether or not your company is functioning optimally in its existing entity structure. You may have started out as a sole proprietorship and have outgrown it. It is certainly important to evaluate entity structure if your company is currently netting more than $100,000 per year.
Be aware that if you incorporate, you'll probably now be required to take funds out of the business via payroll rather than simple draws.
There is a lot more paperwork involved under this status, but the tax perks and security that a corporation offers may turn out to be more beneficial. Always explore these possibilities with your attorney and tax pro before making a choice.
Offer employee benefits.
People are our most valuable business asset and should be treated keeping that in mind. There are many employee benefits that are not taxable to either the staff member or the business. Check out IRS Publication 15-B, Guide to Fringe Benefits to find out more on this subject. You will save your money in payroll taxes while you produce a better working environment for your employees.
Purchase furniture and equipment.
The IRS has always recompensed outlays for capital assets by offering the Section 179 Deduction. This particular deduction allows the immediate expensing of capital assets rather than depreciating them over their useful lives. Be warned however. This year, the limit for purchases decreased from $500,000 to $25,000. However, Congress will be looking into extending that ceiling probably sometime during fourth quarter. You can start putting money aside for the purchases now.
Perform forecasts.
Take a good look at your financial statements. Run a profit and loss and compare it to the prior year profit and loss through the end of June. Are there considerable changes? Are you expecting an increase or decrease in sales and/or expenses through the end of the year? It's a straightforward matter to export your data from QuickBooks into Excel wherein you can play with the figures to determine what your year-end bottom line will be. Impart that data with your tax pro to find out if you must change your planned tax payments accordingly.











