Give Yourself a Tax Cut
Don't wait for lawmakers to have a tax exemption for you. Here are few options to give one to yourself. It has been one of the most turbulent, unpredictable years in recent history, and yet we now have a sort of clarity just in time for the tax season. However, it is not a sure thing. There's a narrow majority.
Even with a Democratic legislature likely to pass more coronavirus aid, any of the loftiest tax code reforms do not pass. After all, the fact that funding relief needs to come from elsewhere is a fiscal fact. That said, in the very near future, business owners should brace for significant improvements to tax rates. The majority wise the small and medium-sized business owners must be prepared.
Consider how you've incorporated your corporation, especially for the smallest firms. If you are a single-member, it can combine your business and personal accounts with tax time. This not only increases the audit odds but makes it impossible to evaluate what should be legitimately removed as a company expense. If you haven't, explore being an S-corp this opens up your deduction options, guarantees a clearer tax record, and is expected to save you thousands of dollars in the long term. A t the beginning of the year, undergo a consultation with your financial and legal experts to see if you could gain from a transition in how your agency is named.
Prepare for audits
Assume that by clamping down on current laws, the administration will increase tax revenue. This could come in the shape of a spike in the IRS's internal auditors. Although it is recommended to maintain clean records and be prepared for an audit, this possible spike in auditors obviously raises the odds of getting one of those envelopes with the dreaded "Internal Revenue Service" return address in the corner. This means taking some minor steps, such as ensuring that you always retain the initial receipts for deductible transactions (not just the receipt of the credit card).
It's indeed one thing to find strategies to get more deductions, and your accountant will be happy to help, but the holy grail is tax credits. That's because tax credits result in a dollar-for-dollar reduction instead of a percentage knocked off of your overall tax bill. Ultimately, it means more cash at the end of the day in your pocket.
Take advantage of pre-tax
There are several ways in which small and medium-sized firms can relieve tax pressures by leveraging pre-tax accounts, whether it be tucking money away in a 401(k) before the political winds blowback towards lower tax rates or taking advantage of HSAs and FSAs. Hospital bills may be one major thing. They rapidly add up. If you know the medical bills are coming, ensuring that the FSA program is up to standard will ensure that you don't pay for them with post-tax funds. There are plenty of other legitimate ways to ensure you can maintain and grow your company capital for more pre-tax dollars, but they can get more difficult.
It is perfectly doable and entirely legal by giving yourself a tax cut. In order to research the intricacies and nuances, just take every measure possible. The future is never certain, as 2020 has shown, but planning the tax strategy of your businesses makes it less uncertain. And the time to begin planning is now!!