Tax Season Monsters
My name is Kathie. I'm an Enrolled Agent and have been working with S-Corps and LLCs for the past 5 years. One of the most common issues for a lot of businesses comes from avoiding finances until the end of the year. By neglecting your finances like this you are literally tying your tax preparer''s hands behind their back. While we can do a lot of things even after the year is over, it is nothing compared to what we can do for you during the year. Today I am giving you the basics of tax savings for businesses. There are a lot of variables in every tax planning session. Knowing the basics will help you understand and minimize some of those variables.
Step 1. Figure out your projected net income for the year.
-This is your income minus expenses.
-For S-corp. This is before your wages but after employees wages.
-Double check that everything you are deducting from your income can be deducted according to the IRS. For example meals for travel and meeting with clients are 50% deducted. Christmas parties for employees are 100% deducted. However, going out with shareholders to discuss business is no longer deductible.
Step 2. LLC's and Scorps have different needs in this step.
-LLC can put money in their Self Employment Pension (SEP) account to minimize their tax burden up to 20% of your business income.
-If you are making more than 30k net you need to be an S-Corp for tax purposes.
A) Need to minus out any moneys going to healthcare and retirement accounts if you haven't already.
B) Then multiply your remaining net by 29%. This is the wage you need to take for tax purposes only.
Step 3. You need to put it all together in your personal tax return where you will actually pay the taxes.
-Add the net income from your business and any additional wages to your projected tax return.
-Make sure you also add in any SEP deductions you plan to make.
-Add in all income and deductions for spouse and family.
Step 4. This step is important not to forget
-Review income, expenses, and all projections monthly.
These are just basics and there are always if, ands, and buts in finance. I do free consultations if you would like clarification on any of the above information.
If you are like many other business owners then you have a lot on your plate and it may be in your best interest to delegate such important tax planning to a professional. In such cases I am more than willing to help, Just set up an appointment and we can discuss if my services meet your needs.