Date: December 14, 2021
And Why Your Accountant Probably Hasn’t Told You About Them
Most business owners think the accountants that prepare their taxes every year are supposed to be saving them money in taxes, but they are often wrong. Unless you’ve specifically discussed strategies and plans to put in place to reduce your taxes every year, you can bet you’re paying more than your fair share of taxes. As a business owner myself, I know how important it is not to waste cash that could be used in your business. My goal is to help business owners by shining light into the places where cash is leaving the company, unintentionally; and help them put a plan in place to bring those dollars back. Taxes happen to be one of the most often overlooked line items on the business, but also have the most opportunity for savings.
We know the tax code is confusing, complex, and overwhelming for most business owners. It’s really not fair to entrepreneurs. Unless they specifically go to school to learn how taxes work, chances are no one has ever told them about the things they can deduct, ways to structure their business to pay less tax, etc. That’s what I’m here for. Below are 3 of our most impactful, yet easiest to implement, tax strategies that can help you pay less tax next year.
1. Hire Your Kids:
– When you employ a minor child, you can pay them up to 12,950 (plus an extra 6,000 if you put it in an IRA for your child). That’s a potential 18,950/year you could deduct from your taxable income (but still keep the funds within your household and not have to report it as taxable income). This one strategy could potentially save you an extra 1,579/month
2. Pay your health insurance through the company:
– Medical insurance is EXPENSIVE! Unfortunately, most business owners think that because it is a personal expense they can’t deduct the cost of health insurance from their business. The self employed health insurance deduction applies to all medical/dental/vision premiums for the business owner, their spouse, and their dependents. This allows you to get a business deduction for your health insurance payments every month, that you would have had to pay for anyway, but without the business deduction. There is some initial setup required, but it’s relatively easy and straightforward if you have the right people in your corner. If you’re paying 1,000 per month in coverage, that’s an extra 12,000 in additional business deductions every year!
3. Have your company help fund your retirement:
– Listen, no one wants to work until the day they die. It’s so important to save for retirement so you have financial security and stability and don’t HAVE to rely on bringing in revenue every month to survive, and thrive. Retirement doesn’t have to be a ‘one day’ pipe dream, you can (and should) start putting funds away today for the future you want tomorrow. Because the government wants to encourage taxpayers to save for retirement they’ve built in tax incentives within the tax code to give you tax benefits for your retirement contributions. If you’re not having your company pay for 1/2 of your retirement contributions (and you own an S Corp) there are tax dollars you’re paying that you don’t have to. If you are a sole proprietor or a single-member LLC, you can still get the deductions, you just have to structure it a little differently. Even if the business only contributes 250/month to your retirement, thats an extra 3,000 in tax savings!
With just the three tax strategies listed above, that’s an extra 33,950 in business deductions. For someone in the 28% tax bracket (most business owners making more than 200,000 per year fall into this category) – that’s 9,506 less in taxes than you would have paid without implementing the strategies. If you have questions about how to make any of these strategies work for your situation and reduce the amount of tax you have to pay next year (and every year going forward), give us a call. We’d be happy to help you.