There is a language to taxes, and unfortunately, only accountants have been primarily taught that language. Business owners want to know what they don’t know when it comes to keeping more of what they make. After all, it’s not how much you make, but how much you keep: reducing your taxes and keeping as much of your money as possible is key to building long-term wealth for yourself and those you care about.
Below are some key areas you will learn about in our Tax Essentials workshop. These strategies contain five important factors that can determine your tax position.
Tax Efficiency
Business Entity Selection & Pass-through Entities
Understand entity selection and how you get money in and out of your business. Knowing when you pay taxes, how you are taxed, and how to distribute the profits back to yourself are all key elements that ensure you can get money in and out efficiently.
In our workshop, we will learn more about entity selection and these key considerations. We will also discuss the difference between an S and C Corporation and why many small businesses choose the S Corp option. Its tax advantages are important for you to consider when opting into an S Corp, as is timing. Timing is always a consideration in tax planning.
It’s also important to know how pass-through income operates. When do you pay the taxes from a profit or distribute the earnings? Understanding the timing of your tax payments, estimates, and cash flow of your distributions is key to those profits being converted to real live cash in your personal checking account.
Maximizing & Substantiating Deductions
An Audit Trail to Substantiate & Capture All Expenses
Follow a series of best practices to ensure money coming out of the business is accounted for. Make sure you have a receipt for each expense and combine this receipt with a bank or credit card statement to provide extra details. Without a receipt, you may face a series of challenges in proving your purchase. It’s also a good idea to document deductions, such as mileage, so keep track of these expenses as well.
With a year-end tax questionnaire, you can capture any deductions that may be applicable to you and your business. We offer a simple tax organizer and questionnaire, accessible on our website here. With an easy yes-no format, it’s easy to make sure you’ve covered your bases and checked all the boxes — giving you peace of mind.
Personal Tax Considerations for Savings
HSA & Retirement Plan Contributions
In EWH’s Tax Essentials Workshop, we’ll discuss the mechanics of various vehicles like HSAs and retirement plans. These offerings help you save for your future and reduce your taxes simultaneously. For those eligible for a Health Savings Account, this is a great way to save money for future healthcare-related expenses and reduce your taxable income at the same time. Certain retirement plans may work differently, but many offer the option to deduct pre-tax. This again reduces your amount of taxable income for the year. In others, you can put in money post-tax, and take it out later for tax-free growth.
Business Tax Considerations for Savings
Section 179, Cost Segregation Study, & Cash and Accrual Accounting
Depreciation allows you to reduce your taxable income as a business. Section 179 is a useful tool to speed up depreciation, enabling you to expense purchased equipment the year it was put into use. However, you should be aware of other tax planning considerations that may impact your decision to utilize Section 179. For business owners that own a building, a cost segregation study can also accelerate depreciation. Cash and accrual accounting helps you keep score for tax purposes.
Other Tax & Cash Flow Considerations
The Impact of Loans on Taxes
Most business owners do not realize that when you pay off a note, it doesn’t reduce profits and therefore doesn’t reduce taxes. Without knowing this, they will make a payment and later discover they still owe. We will talk more about how this works and why in our workshop.
These are important tax planning strategies to discuss with your accountant. Keep in mind that each strategy depends on your situation, and they all have their own unique rules. This list gives you a great platform to start the conversation. Attend our Tax Essentials Workshop where you will learn how each of these strategies work and how you can become more tax-efficient, minimize your income, and reduce your taxes.
