As a business owner, you know first-hand that taxes can take a big chunk out of your pocket. No matter how small your business is or how large you grow, you’ll always be on the hook for some kind of taxes. However, the tax code is such that there is always room for strategic tax savings as long as you operate within the laws. Your CPA is the best source of tax-saving strategies, but it can help if you present some of your own ideas, too. Here are some that are worth considering.
1. Consider Hiring Independent Contractors Instead of Employees
Payroll taxes are something every business owner needs to consider before making a commitment to add another employee to the payroll. Payroll taxes are one of the larger taxes that business have to pay, and they come around not once, but usually at least twice a month. One way that businesses have gotten around paying payroll tax is buy hiring independent contractors instead of employees. You don’t have to pay payroll tax on independent contractors that you hire. Of course, there are certain rules about what constitutes an IC and what constitutes an employee, but once you ensure you would be in compliance, you may be able to get by with ICs.
Gifts can be a great way to say “thank you” to the clients who’ve helped you have a successful year. Some companies choose to send cards, which only cost pennies, but others want to go above and beyond. Sending a gift can make a deeper impression.
Reasons to Give Clients Gifts
Your clients support your business and keep your business afloat. It’s only natural to want to show them appreciation. Giving them tokens of your gratitude for their business can build goodwill and develop a closer relationship. Strong business relationships are so important that a Harvard Business School study found that 85% of professional success comes from people skills.
Giving gifts ensures that you remain in the person’s mind, as it’s hard to forget someone who gave you something nice. While it may not bring it business immediately, if a future business need arises that you can fill, they’re more likely to reach out. If it’s been a while since they brought your company business, it’s a subtle reminder of the work you’ve done for them in the past.
The deadline for implementing the FASB’s new leases accounting standard, ASC 842, is fast approaching. Many private companies are only just now realizing that they need to examine their leases in light of the new requirements to bring most leases on-balance sheet. Adding right-of-use assets and corresponding liabilities could change important ratios and impact lending agreements, and more.
If you haven’t already, now is the time to think about how you will ensure compliance in 2020.
Overview Of The Standard
The FASB passed this new standard due to concern that a company’s balance sheet did not truly reflect its assets and liabilities without including lease obligations. After all, they are an ongoing expense and, in some industries, can significantly impact the business’s results.
If you ever want to apply for a small business loan, the lenders will want to see your business plan. Your business plan gives lenders a concise snapshot of your business model. Having a small business plan also gives the owner added benefits. Often, business owners refer back to their business plan to ensure that they are holding true to the foundations of the business. A well-written business plan can help you stay on track to reach business goals for years to come.
What Should be Included in Your Business Plan?
A standard business plan is typically comprised of eight sections. Each section explains a different category of information about your company. Investors will look at the business plan in terms of sections and as a whole. Here is everything that you should include in your business plan:
In these days of the gig economy, more business owners are leveraging the affordability and convenience of hiring freelancers (independent contractors) instead of regular employees. It makes sense. There are some tremendous benefits to hiring independent contractors (ICs), including not having to pay for insurance and payroll taxes. Another huge benefit to hiring ICs is that business owners can’t always predict busy times and down times. When seasonal shifts in business necessitate extra help, the business owner can bring on more staff without making any long-term commitments. As business slows down, the owner can simply let the ICs know their help isn’t needed anymore at this time. It seems like a dream come true from an employer standpoint.
However, there are strict IRS rules regarding classification of ICs. If you mistakenly or intentionally classify a worker as an IC when they should be classified as employee, you and/or your business would be held financially liable to the IRS and to the worker. The IRS isn’t setting you up just so they can catch you out. They have established a 20-Factor Test for employers to determine if a worker is classified as an IC or an employee.
Just because there’s a positive balance in your checking account doesn’t mean that your business is making money. Checks that you’ve written for expenses may not have cleared yet, or customers could have paid in advance. Relying on a positive balance to determine if your business is solvent could be dangerous.
Cashflow represents the movement of cash in and out of your business. Cashflow management seeks to match the inflows and outflows so that you’re never short-handed, though sometimes business owners must borrow to cover gaps.
Learning more about the ups and downs of how cash flows in and out of your business will help you make better strategic and borrowing decisions. The past can inform the future when forecasting cashflow. But before you get into analyzing a cashflow statement, you must understand it.
Sections of the Cashflow Statement
If you own your own business you already know the joys of being your own boss. You may even have thought about bringing your spouse and/or children into the fold. There are definitely some benefits to hiring your spouse or children. Here are some to consider.
Tax Advantages of Hiring Children Under 18
There are several tax benefits when business owners hire children under 18, as long as the child is still a dependent. If the child is 18 or older and not a dependent, they’re treated no differently than if you hired a job candidate off the street, tax-wise.
First, the child can earn up to the standard deduction amount without having to pay taxes on their earnings. If you have a retirement plan in place, up to a certain amount of additional dollars can be contributed tax free. Your CPA can help you determine exactly what that amount is, based on the type of retirement plan your business has. They can also help ensure that you take advantage of all the tax benefits of employing your dependent child.
It may be the first gorgeous day of fall, but it won’t be long until April 15 comes knocking. Be prepared for next year’s tax deadline by beginning your preparations today. That means, as a small business owner, now is the perfect time to begin organizing receipts, collecting owed payments and deciding on year-end purchases. Do it now, and you won’t have to dread facing it in the spring.
Clear Outstanding Invoices
Organization is king, especially for anyone who owns a small business. If you haven’t already, begin getting things in order by clearing any outstanding invoices. Make those collection calls to clients who’ve been slow to pay. Studies show that the longer you allow unpaid debt to linger on the books, the less likely you’ll be to ever receive payment. And here’s another tip: Hire a certified bookkeeper to make your collection calls. A certified bookkeeper understands the language of collection calls, and what you are and aren’t permitted by law to say. Keep yourself and your company out of the legal doghouse by letting a pro handle this end of the business. By hiring someone else to do the handle the collections, you’ll also have a buffer so you can maintain amicable client relations.
Small strategies make big impacts when it comes to figuring out the year’s deductions. Sadly, many small business owners never get the help they need because they’re simply unaware of the many tax deductions available to them. This is where a good, knowledgeable CPA is invaluable. And since you’re hiring your CPA to help you organize and prepare your taxes – he or she becomes a deductible business expense, too. Tons of little-known, obscure strategies will help pull you out of the hole come tax time; it’s just a matter of discovering what they are and how best to take advantage of them. If you want to shave money off what you’ll owe the IRS next year, give these strategies a try. You’ll be surprised at how much of your hard-earned cash you’ll be able to legally keep.
Deduct the Cost of Help
Hire an expert. We’ve already discussed the wisdom behind hiring a professional accountant to help keep your books in record shape, but there are other pros out there who could make your life easier while building up your deductibles, too. Everyone from the copy writer who pens your social media posts to the team who cleans your office are fair game. So long as they’re helping you run your business and you pay them for that purpose, the money you pay them is tax deductible.
If you’ve owned your home for a couple of years, you might have started thinking about refinancing. Maybe interest rates have dropped, and you want to save money, or you want to tap into your home’s equity to remodel your kitchen.
Learn about the pros and cons of refinancing your house and how it could impact your financial situation so you can make the best decision for your family.
Pros of Refinancing Your House
Here are some of the reasons why you might consider refinancing.
- Lock in a lower interest rate and lower monthly payment
- Refinance into a better loan product
- Free up equity for a remodel or other purposes
Interest rates fluctuate over time. If rates have dropped significantly since you first bought your home, it could be worthwhile to refinance. Since you’ll pay fees to refinance, most financial advisors recommend that you plan on staying in your home for at least five years after the refinance.
Which Items are Tax Deductible when Selling a House?
When you list your house on the market, you’re probably thinking about how much money you’ll make or where you want to move next, not about your taxes. A home sale does have tax implications which can either help or hurt you in April.
Find out everything you need to know about selling a house and personal income taxes before you plan on spending the profits from selling your home.
Which Common Home Selling Costs are Deductible?
Not all of the costs related to a home sale are deductible. Here are the costs which can be used to offset any profit and reduce your tax burden.
Change is a constant part of life. With each change, adjustments have to be made. Certain changes in our lives puts us in a different tax category or changes how we need to file our taxes. Legally, we may come under different rules and requirements. There are tax advantages or credits that come with some of life’s changes. Below are a few events that can take place in your life where you may need some professional guidance with the filing of your taxes.
As a single person, you filed your taxes as a single individual. Now that you are getting married, will it be cheaper to file a joint tax return or separate tax returns? One spouse may own a business or may quit their job. Are there children involved? A CPA can take all of your circumstances into account. Then they can help you set up your tax returns and finances for your best advantage.
The tax laws allow exemptions when you have a new baby. You will be able to take advantage of certain tax breaks. A CPA can help you understand which exemptions you qualify for and keep you up to date on current laws.