As the 2019 tax deadline approaches it is time for you to start thinking about how well you’ve managed your financial footprint to minimize your tax liability.
If you have not done any planning it is not too late, here are some simple tips that are helpful at reducing your taxes:
Form a Corporation
If you’re a solopreneur or casually running a business, you may want to consider registering a business. Without establishing a business, you are effectively opting out of tax benefits designed by the IRS to encourage entrepreneurship. Your corporation may also be eligible for business tax credits which flows to your 1040.
Keep Track of Your Expenses
Be sure to keep track of all expenses and keep your receipts. You may want to invest in an affordable accounting software that helps you keep track of expenses charged to your business bank accounts and credit cards. You may also want to hold on to all cash receipts so that your accountant does not classify your ATM withdrawals as owner’s distribution. If you've charged business expenses to your personal accounts, be sure to seek reimbursements from the business or have your accountant increase your Owner's Investment account.
Know All Business Deductibles and Credits
If you decide to use Turbo-tax or H&R Block for tax preparation be sure that you are personally aware of all available business deductibles and credits unique to your business. You may want to discuss, options available for write-off. Be sure to ask about motor-vehicle, home office, and asset depreciation write-offs. If you're environmentally conscious, ask about energy saving credits.
Maximize Your Retirement Contribution
As an entrepreneur, you are responsible for your retirement. Also, it’s not about how much you make but how much keep. If you have not opened a 401k or traditional IRA account. You may want to consider doing so now. Each year try to contribute the maximum amount to each account. Remember, both 401K and traditional IRAs reduces your taxable income.
Health Savings Accounts
Opening a health savings account works just like the 401k or IRA except this savings account must be maintained and used specifically for your medical expenses. If you cannot afford monthly health insurance, consider setting up an HSA account for the dual benefits.
Treat Your Staff
Putting your employees on payroll and also giving them options of bonuses, gift cards, 401k plans and health insurance can be written off as business expenses. Additional benefit, your employees will feel more appreciated and will be loyal to you. If you do not have employees, you may want to consider setting up a payroll for yourself and having the business contribute to your 401k retirement plan.
Find a Competent Bookkeeper or Tax Preparer
If you're too busy, to manage your own finances and keeping track of things you need to do to maximize on tax benefits available to you, hire someone. Having a competent accounting partner can save you more money than what you think you save from not hiring an expert.
If you are looking for a dedicated and experienced accounting partner. Be sure to reach out to us! We will be more than happy to work with you.