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Optimize Your Business Tax Planning and Get Ahead

Business owners know that every penny spent on running their operations matters. Monitoring operational expenses is an essential responsibility of business owners like you, who seek to maximize revenue. You are continually seeking cost-saving operational efficiencies or simple ways to do more with less.

After all, generating profits is the goal of every business, and operational inefficiencies can negatively affect your bottom line. Yet for some reason, many smart business owners aren’t doing as much as they can when it comes to their business tax planning.

What is Tax Planning for Businesses?

What is Tax Planning for Businesses?

When many people think of tax preparation, they think of accountants, the IRS, a stack of government forms, and an April 15 filing deadline. Yet business tax planning, which is different than standard accounting, is a strategy that enables compliance with government IRS regulations while enabling business owners like you to pay just enough in taxes though not a penny more. If your business lacks such a strategy, you could be paying a lot more in taxes than you need to.

Business tax planning involves looking at your business financials from a holistic perspective that extends beyond complying with IRS requirements. By evaluating your financials and tax returns, tax planning experts can identify legal opportunities to lower your tax liability and associated costs. Such experts can also advise you on how to take advantage of new tax laws and regulations so you can pay less in taxes.

Tax Planning for Business Owners: What You Don’t Know Can Cost You

By working with business tax planning experts, you can employ several legitimate strategies for lowering your tax burden as a business owner. For instance:

  • You can shift your business income to strategic time periods or entities to reduce tax liability.
  • The timing of when you purchase business assets and when you offer employee promotions and bonuses matters significantly from a tax perspective.

Moreover, you can make the most of business tax deductions, including business expenses and donations to lower your larger tax burden. More than commonly thought of expenses, such as travel, office equipment, building rent, and mileage, you can also write off other expenses such as employee benefits programs (including 401k savings plans) as well as some research and development expenditures.

Leverage Business Tax Planning to Take Advantage of Government Incentives

Leverage Business Tax Planning to Take Advantage of Government Incentives

Sometimes, how a business is structured can result in greater or lesser tax implications. That is, business owners could have a larger tax burden just because they’re set up as a sole proprietor instead of an LLC.  

Moreover, many business owners may not be taking advantage of existing government tax credits and incentives because they don’t know about them. The government has numerous incentive programs for businesses, including ones for hiring military veterans and for building businesses in economically distraught locations.

While many business owners are continually trying to manage costs, they may be overlooking business tax planning as a vital way to maximize profits while spending less.

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Disclosures:

Investment risk: All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
Diversification: A diversified portfolio does not assure a profit or protect against loss in a declining market.
401(k): Before deciding whether to retain assets in a 401(k) or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock. Please view the Investor Alerts section of the FINRA website for additional information.
IRA limitation & early withdrawals: Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney.
Retirement Plans: Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty.
Roth IRA: Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.

The guarantee of the annuity is backed by the claims paying ability of the issuing insurance company.

Although it is possible to have guaranteed income for life with a fixed annuity, there is no assurance that this income will keep up with inflation. There is a surrender charge imposed generally during the first 5 to 7 years or during the rate guarantee period.