Taking Care of Your Taxes To Help Grow Your Company
We're more than half way through 2014: Exactly where does your small business stand in terms of taxes?
Last week, a client of mine had an ugly surprise when I finalized his tax return and disclosed he owed a lot of money to the Internal Revenue Service. His first reaction was to be mad at the mediator. But, 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 substantial change to your business's bottom line (in either red or black), it's time for a visit to your tax expert. In fact, everyone who manages a small business should take advantage of the mid-year off season to sit down with a tax professional to explore their financial statements as well as potential tax liabilities. It's considerably easier to strategize and put a plan of action in place now than to run around at year end upending pails of water on all the little fires that have been boiling all year. Here are some tips to look at with your tax pro to spruce up your tax situation and ideally retain working capital in your bank account rather than in Uncle Sam's pocket:.
Open a retirement plan.
If you're at last a few bucks on top and do not have a retirement fund, now's the chance to open one. Here's the perk: it's deductible!
Speak with a reliable financial advisor or a representative from your financial institution to establish what kind of design best suits your demands.
There are a large range of vehicles from Individual 401(k) plans to SEP IRAs to EASY plans that may or may not call for you to involve employees in the plan.
If a plan calls for employee participation, do not rapidly dismiss it.
Setting up a retirement plan for your workers could be a significant way to give raises that don't require the added cost of employer paid payroll taxes. Read IRS Publication 560 for more information.
Evaluate your legal structure.
Take the time to look at if your organization is operating optimally in its existing entity structure. You may have started out as a sole proprietorship and have outgrown it. It is particularly important to examine entity structure if your organization is currently netting more than $100,000 per year.
Also keep in mind that if you incorporate, you will now be required to take funds out of the business via payroll rather than simple draws.
There is a lot more documentation involved under this status, but the tax benefits and protection that a corporation offers may turn out to be more beneficial. Always go over these alternatives with your attorney and tax pro before making a choice.
Provide employee benefits.
Employees are our most important 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 company. Check out IRS Publication 15-B, Guide to Fringe Benefits to learn more on this matter. You will save your money in payroll taxes while you create a better working environment for your workers.
Purchase furniture and equipment.
The IRS has always rewarded outlays for capital assets by providing the Section 179 Deduction. This special deduction allows the immediate expensing of capital assets as opposed to depreciating them over their useful lives. Be cautioned however. This year, the limit for purchases decreased from $500,000 to $25,000. However, Congress will be looking at extending that threshold probably sometime during fourth quarter. You can go ahead putting money aside for the purchases now.
Perform projections.
Take a close look at your budgetary reports. Run a profit and loss and contrast it to the previous year gain and loss through the end of June. Are there considerable changes? Are you preparing for an increase or decrease in sales and/or expenditures through the end of the year? It's a simple matter to export your data from QuickBooks into Excel where you can play with the figures to determine what your end-of-year bottom line will be. Give that data with your tax pro to figure out if you must change your planned tax payments accordingly.










