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Strategic Tax Planning

Facebook has been able to boast about many accomplishments, from their acquisition of virtual reality technology company Oculus VR, Inc., to the first time they hosted over one billion users in one day. For the company, it’s likely none of these accomplishments will be as well regarded as one related to their finances. In 2016 Facebook anticipated that their effective tax rate would fall from 40 percent to about 27 percent for the year. With the federal corporate tax rate at 35 percent at the time, this rate would have been considerably lower. Facebook serves as just one example of how large corporations use a strategic tax plan to lower their taxes, saving thousands of dollars every year. How did Facebook, along with other major companies, pay a tax rate lower than your business? The answer is strategic tax planning.

How Do They Do It? Facebook Paid a Lower Tax Rate Than Your Business

Effective Tax Rates

It’s natural that as companies begin to make more money they start thinking more carefully about their taxes. It’s one reason why major corporations employ teams of experts that work together to take advantage of every tax-reduction strategy allowed by the tax code.

While Facebook has declined to comment on the exact strategies used to lower its tax rate, the effective tax rate reported by companies to the SEC is often higher than what the company actually pays. This means, of course, that the 27 percent effective tax rate Facebook expected to pay might be higher than what they actually paid. Some tax experts have estimated that when Facebook was reporting a 40 percent tax rate, they were likely playing closer to 13 percent.

Strategic Tax Planning

Facebook is hardly the only major U.S. company that works to find ways to lower its tax rate. A vast number of companies on the S&P 500 had an effective tax rate of 20 percent or lower, and at least a few of the companies paid essentially zero in taxes. In fact, many of the tax strategies that Facebook and other large companies used have become commonplace among corporations of their size. Just because the big companies use them, however, doesn’t mean these strategies aren’t available to smaller companies.

Facebook being able to lower their effective tax rate is impressive, but it’s not impossible for smaller companies to replicate. It all starts with a strategic tax reduction plan — the Tax Blueprint® from Financial Gravity.

Businesses of all sizes should think of a strategic tax plan as standard operating procedure. This is a business fundamental that far too many businesses are lacking. Businesses want to maximize money coming in, of course, as well as minimize money going out. The easiest way to increase profit is to cut unnecessary expenses, such as overpaying taxes. Strategic tax planning helps you keep more of the money you make.

Make The Tax Code Work For You

It might sound dramatic, but a Tax Blueprint® could change your life. Saving thousands of dollars in taxes every year means more capital that you can put back into growing your business. That additional business growth could be what you need to change the trajectory of your business. Every minute you wait to implement your strategic tax plan means more of your hard-earned money is draining away, being overpaid in taxes you don’t legally, ethically, or morally owe. A quick, free assessment is all it takes to start your Tax Blueprint® process.

Companies like Facebook know how to make the tax code work for them rather than against them. We use the IRS Tax Code comprehensively to ensure you pay only what you must. With your Tax Blueprint in hand, you’ll see exactly how the tax code can work for you and your specific business. Each and every tax-reduction strategy we employ in your Tax Blueprint is sourced and referenced directly by the IRS Tax Code. You’ll see firsthand that every strategy is legal, ethical, and moral. With your implementation plans highlighted and summarized, you can be confident that the savings are real.

Maintaining Your Strategic Tax Plan

Beyond your Tax Blueprint, Financial Gravity can help you implement and maintain your strategic tax plan through our Tax Operating System®. Designed to fit any budget and circumstance, our suite of solutions help you save money via strategic tax reduction. Additionally, you can count on access to our advisors, annual tax-planning assistance, ongoing newsletter, and educational materials.

The truth is that you are likely paying too much in taxes, perhaps thousands more than the law requires. Even if you employ a CPA, many do not know how to take advantage of this level of tax planning because they weren’t trained to do so. To leverage the benefits of the tax code, you need to be proactive and you need to have a plan. Through our Tax Blueprint®, Financial Gravity can provide you with a clear, proactive, strategic tax plan that is customized to your business. Contact us today to schedule your free assessment!

Strategic Tax Planning isn't only for big companies

Before the Tax Cuts and Jobs Act of 2017, the top corporate rate for taxes was 35 percent. This rate was one of the world’s highest federal tax rates, which makes it no surprise that GOP lawmakers made lowering overall taxes a priority. While the new law lowers taxes overall, its main focus is on cutting corporate taxes. After the new tax law, there is a single flat rate of 21 percent. Even with corporate tax rates set, America’s biggest companies employ strategies that enable them to pay a lower tax rate. Strategic tax planning isn’t only for large corporations; businesses of any size can navigate the tax code to legally, ethically, and morally pay less taxes.

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strategic tax planning in 2018 and why you need it this year more than ever

The good news is that the new tax law, the Tax Cuts and Jobs Act, includes lower tax brackets and a near doubling of the standard deduction. However, there is also much uncertainty looming regarding the new tax law, as several provisions within the Tax Cuts and Jobs Act (TCJA) remain unclear. Changes to income, confusion regarding itemized deductions for state and local taxes, and other unclear provisions have already caused some taxpayers complications. The new tax law makes strategic tax planning for 2018 more important than ever.

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strategic tax reduction planning

Business taxes don’t happen just once a year, and neither should strategic tax planning. Everyone likes to save money, and you could start saving right away with a Tax Blueprint® from Financial Gravity. Think of your taxes like an illness. You wouldn’t wait to go to the doctor if you were sick, so why are you waiting to start your strategic tax reduction planning?

Now is the Time for Strategic Tax Reduction Planning

Your cure starts with a diagnosis from a Financial Gravity team member to discover what’s causing your tax pain. From there we can create your strategic tax plan, in effect filling your prescription and making a plan to relieve your pain. Once you have your diagnosis, your Tax Blueprint®, we can implement changes that will save you money. The tax code is long, complicated, and overall, not a fun thing to read. Strategic tax planning could be the step you need to take in order to save money in taxes every year.

Proactive Tax Planning

Are you confident that you are taking advantage of every tax break available? The majority of CPAs do not do any proactive training, in fact, most work in reverse. They work historically, completing tax returns that only reflect where you have been, instead of where you want to be going. If you are only looking behind you, then you aren’t planning for the future.

There is no one-size-fits-all approach when it comes to strategic tax planning, which is why the Tax Blueprint® from Financial Gravity is customized specifically to you and your business. The easiest way to increase the profit for your business is to minimize the money going out, ensuring that you aren’t spending any money unnecessarily. While some taxes are necessary, it’s likely that your business is paying more than what is legally, ethically, or morally required, simply because most tax advisors aren’t trained to think proactively. The good news is that you don’t need to wait to start realizing these savings. Every minute you wait means more of hard earned money spent overpaying taxes.

Start Saving Now

For most small business owners, taxes are your single biggest expense. That expense is likely to only grow bigger if you don’t have a sound strategic tax plan in place. If your current accountant, bookkeeper, or tax preparer has not given you at least one idea that saves you a minimum of $1000 in taxes every year, then now is the time for strategic tax reduction planning from Financial Gravity.

We offer strategies that can be implemented right away, from writing off your swimming pool, renting your house to yourself, or hiring your own children. These are surprisingly simple strategies that small business owners can legally use to reduce their taxes. Some strategies will serve you better when you reach a certain threshold, but that’s exactly why your Tax Blueprint® is created specifically for your business. All business owners need a solid strategic tax plan, and we can start working with business owners in their first year of business.

Following our strategies will save you money without increasing your risk for audit. When you receive your Tax Blueprint® you will see every tax reduction strategy we employ sourced and referenced directly to the IRS Tax Code. Along with the tax savings, you will also see implementation plans that are highlighted and summarized so you can be confident that the savings are real and the strategies are legal, ethical, and moral.

Business owners are told a lot of myths surrounding taxes, myths that could be holding them back from bigger business growth. We separate the wheat from the chaff, breaking down the myths that could be sabotaging your business. A Strategic Tax Plan is a true “business fundamental,” and odds are you don’t have one.

Note Changes in Tax Law

The tax code exists to help you pay less in taxes, but you have to know how to utilize it. That’s where strategic tax reduction planning from Financial Gravity comes in. We comprehensively use the IRS Tax Code to ensure you only pay what you must. When you sign up for our Tax Blueprint® you receive a strategic tax reduction plan that is customized specifically to you and your business. The sources of tax savings, directly from the IRS Code, are summarized in your plan so you can be confident that the savings are real.

Don’t procrastinate your strategic tax reduction planning. Start planning now to see the maximum tax benefits. Financial Gravity knows that to leverage the benefits of the tax code you have to be proactive. Contact us today to get your own strategic tax plan and see why it is truly a business fundamental!

When you hear the words “proactive tax planning,” it’s tempting to think of a team of high-powered accountants, financial advisors and tax lawyers working for a large company in a high-rise building somewhere. These setups are known as a “Family Office,” generally utilized by wealthy individuals, families, and entrepreneurs with a net worth of at least $30 million.   Read more

The new Tax Cuts and Jobs Act of 2017 focuses on tax cuts for C-Corps mostly. Yet there are definitely provisions which mean good news for small business owners.

Most small businesses in the U.S. are ”pass-through entities” (partnerships, limited liability companies or S Corporations). Income from these business structures is taxed at individual tax rates, which are changing with the new tax bracket structure. Also, the new tax law is adding a new deduction on Qualified Business Income (QBI). Read more

Do you know how the tax system really works? They say that the way to beat a system is to understand it from the inside out. With that in mind, here’s a quick primer on how your taxes are calculated. Read more

The Tax Cuts and Jobs Act of 2017 begins phasing in for tax year 2018 and beyond, and it’s time to start thinking about how its new provisions, as well as its changes, will affect you and the amount you pay in taxes. Read more

It’s 2018, and tax reform is at hand. The new Tax Cuts and Jobs Act offers lots of planning opportunities, especially for business owners. There are many changes to the existing tax code, changes which can affect your business and its bottom line in unforeseen ways. For example, the new Qualified Business Income rules alone should be enough to keep an army of tax lawyers busy for years. Read more

5 ways to save big on taxes for your small business

The IRS tax code actually provides many ways for small business owners to save big on their taxes–ways that many of which business owners may not be aware. Here are just five:

Lease Your Home to Your Business for the Maximum Time the IRS Allows

Your home has to be rented for less than 15 days to get the deduction. For example, if you have a board meeting every month, you could host all 12 in your home and claim the deduction. You must also rent your home at a fair rate. The IRS does not allow you to just make up an arbitrary amount to charge your company when you rent your home to your business. It must be commensurate with the average price you would pay to rent another location. You must also issue yourself a 1099 form from your company with the total rent amount paid, which you will then claim on your personal taxes. This will be offset once you list your less-than-15-days deduction. Don’t forget: you must record the minutes of any meetings you have in your home–this will provide further proof to the IRS of the validity of the business conducted there if it is called into question.

Hire Your Children to Work in Your Business as Spelled Out in the IRS Code

A business owner can hire and pay their own child under eighteen tax-free. As long as your child is doing legitimate work and getting paid a reasonable rate, you can pay them up to $6,300 per year before they have to pay a dime in income tax. However, you may still have to pay payroll taxes such as FICA and FUTA, which go towards unemployment and social security benefits. On the other hand, you don’t have to pay payroll taxes for employing your kids if your business is a sole-proprietorship, a single-member LLC taxed as a disregarded entity, or an LLC taxed as a partnership and owned solely by you and your spouse. But if your business is a corporation, you must pay payroll taxes on income to your children. Even in this last case, there may be workarounds, but these are best discussed with a professional tax advisor.

Change Your Health Plan to a Qualified HSA Plan to Save the Most Taxes Possible

HSAs escape taxation by allowing holders to save tax-free money for medical expenses not covered by insurance. Contributions are made into such accounts by employees and/or employers, and unused funds roll over from year to year. The contributions are invested, earning returns over time, thanks to the power of compound interest. Funds can be removed tax-free to pay for qualified medical expenses, including vision and dental. HSA deposits (from an employer or individual) are federal income tax-free and not subject to employment taxes. Secondly, HSA growth from income and investment appreciation is not subject to federal income taxes. Finally, if the HSA funds are withdrawn for qualified medical expenses by the account owner, spouse and/or dependents, such withdrawals are not subject to federal income tax. There is no other place in the tax code which allows ordinary income to escape federal taxation forever. But of course, you have to know the HSA rules and follow them carefully. This is another case where it would be good to consult a tax advisor to help you create the best plan for your business and unique situation.

Maximize Retirement Savings to the Fullest (If You’re Over 50 Chances Are You Are Not)

There are many legal ways to maximize your retirement savings and lower the taxes you pay on them. For example, you could start a diversified retirement plan–the funds will help cut down your tax bill now and grow tax-deferred until you make withdrawals in retirement. In most cases, the cost of opening and administering a plan is pretty small. The four main options for small business owners are a SEP-IRA, a SIMPLE IRA, a Solo 401(k) and a SIMPLE 401(k). For all but SEP-IRAs, a business can be a sole proprietorship, a partnership, a limited liability company or a corporation.

Start a Private Foundation

Establishing a private foundation is a great way to use family funds and property tax-free, all while engaging in charity. However, under the IRS Code, a not-for-profit is not exempt per se from federal income tax. In fact, a private foundation is fully taxable unless and until it applies to the IRS for recognition of its status as a tax-exempt organization; even then, it may lose its tax-favored status if it fails to file annual tax returns with the IRS.

It pays to do your homework–consulting with a tax or financial planner can greatly help with setting up tax savings strategies properly. Find out more about how you can bring on a financial advisor who will truly assist you in not only saving on your taxes but give you a solid plan for the future. Speak today with a Financial Gravity team member, Let’s Talk!