For business owners, lower taxes are likely a gift that you’d like to see under the tree. Thankfully, it’s not too late to add it to your holiday wish list. It even has a name, strategic tax planning. Strategic tax planning is a gift that won’t fade once the newness wears off, and it’s one that continues to give to your business year after year. Strategic tax planning could save your business $20,000, $50,000, even $100,000 in taxes every year. This year stop wasting money on taxes you don’t owe. Instead, give yourself the gift of strategic tax planning, and get rewarded year after year with lower taxes.
Finding tax and investment advisors who give you proactive advice for saving on your taxes probably feels like an elusive search. The truth is that not every tax professional, in fact, the majority of them, do not do any proactive planning. Most CPAs are not even trained to do this level of tax planning. If you’re ready to leverage the benefits of the tax code and stop spending money unnecessarily, then you need a tax professional who understands business owners. At Financial Gravity we are versed in the minutiae of the tax laws, and we can help you keep more of your money with strategic tax planning.
There are many advantages to giving to charity. While doing good is in and of itself its own reward, it also probably makes you feel good. Reaping the tax benefits from that charitable giving has also been a nice perk. While taxes might not have been at the forefront of your mind when providing assistance to others, the tax deduction for charitable contributions has typically helped shave money off your tax bill if you itemize instead of taking the standard deduction. Under the new Tax Cuts and Jobs Act, the deduction for donations is unchanged, but the bar is higher with the nearly doubled-standard deduction. ‘Tis the season for charitable giving, so make sure you do it correctly and stay on the nice list.
You might think of spring as “tax season,” but that is a misnomer for small business owners. In reality, tax season should be thought of as tax filing season. Yes, it’s important to get your tax return filed on time, but the need for tax planning is really an omnipresent one. Filing your taxes is merely the end of a year-long cycle where you should see results of everything that happened in the past year. There are hundreds of opportunities to minimize your taxes throughout the year, but it starts now with a proactive tax strategy. If you want to pay less on your taxes, you need a tax professional who works for you year round.
Legend holds that in 1494, an Italian friar named Luca Pacioli was sitting under an apple tree when an apple bounced off his head. In a flash of insight, he invented the “double-entry bookkeeping” system where each entry has a corresponding and opposite entry to a different account. Those entries, called debits and credits, help accountants avoid headaches — if the debits and credits don’t balance, there’s a mistake somewhere. (Some of you may be thinking that was Sir Isaac Newton with the apple inventing gravity, but this is our story and we’re sticking to it.)
Double-entry bookkeeping has ruled accounting for over 500 years. We see it everywhere today, including in our tax code. Revenue flows in, balanced by expenses flowing out. Anything left over eventually winds up in the “taxable income” account.
Sometimes, with taxes, that balance breaks down, and many of those disconnects spell opportunity. Real estate investors, for example, can depreciate the price of their properties over time. (We can help you with “cost segregation” strategies to do it even faster.) In the IRS’s ideal world, you’ll repay those breaks by “recapturing” them as income when you sell. But with tax-free exchanges, stepped-up basis, and other strategies to avoid that reckoning, most of those depreciation deductions never get recaptured at all.
Now it’s Halloween: America’s second-favorite, and second-priciest, holiday. The National Retail Federation reports we dropped $9.1 billion on the spooky season last year, including $2.7 billion on candy. (Fun fact: Halloween candy is cheapest exactly four days before the 31st.) How does all that fit into Luca Pacioli’s neat little boxes? Well, it gets scary the minute the greedy little trick-or-treater on the other side of your door goes running down your sidewalk with their loot!
Here’s the disconnect. The candy company sells sweets to a retailer. That’s a taxable transaction. The retailer sells them to you. That’s another taxable transaction. But then you just give it to the little goblins, pirates, and princesses on your porch. No deduction for you, no income for them, no 1099s for the IRS. (Ugh. Can you imagine the 1099s?) That removes everything from the IRS’s world of debits and credits. Seriously, if the IRS taxed kids on their Halloween candy, they could collect millions of dollars to cover free dental care for everyone.
It’s all very ironic because, as any parent knows, Halloween is an exercise in managing the waste of assets. Your kids come home with bulging bags of candy and dreams of sugar highs lasting until Thanksgiving. But pretty soon the good stuff is gone. No more Kit-Kats or Snickers! They’re left with a couple of “fun-size” Milky Ways, some of those Jolly Ranchers nobody really likes, and a few stale candy corns. At that point, you “charge off the goodwill” by throwing out the dregs while they’re at school and hoping the kids don’t even notice.
Today, your average accountant or tax professional focus their effort on making sure the debits match the credits. But we don’t just stop there. We take the time to look for those tax “disconnects” that can rescue thousands in taxes. There’s nothing scary about it at all. So call us when you’re ready to pay less. You’ll think the savings are pretty sweet!
The Tax Cuts and Jobs Act was signed into law by President Trump in December 2017, ushering in a new wave of tax rules. The tax code is thousands of pages long, full of obscure rules on topics that don’t apply to most Americans. It’s likely that you don’t need to know expensing costs for replanting citrus plants, net operating losses for life insurance companies, and limits on FDIC premiums that banks with more than $10 billion in assets can deduct. With all the new tax law changes, what you need to understand is how the Trump tax plan affects you, and how you can take advantage of these new rules to keep more of what you make. At Financial Gravity we know that, in the end, it’s what you keep that counts.
In 2017 the corporate tax rate was 35 percent, but most American companies paid far less than that. The Tax Cuts and Jobs Act created a single flat rate of 21 percent, but even that number is higher than studies indicate corporations are paying. What corporations actually pay, their effective tax rate, is estimated to be between 13 and 19 percent for federal taxes, based on multiple studies. That effective tax rate is far lower than the rate many other small businesses pay every year. The tax code is full of opportunities for businesses to save money — if they know how to leverage the tax law for their benefit. The problem is that most tax preparers are concerned only with what they see in the rearview window, without being able to look forward. Strategic tax planning from Financial Gravity gives business owners of any size the tools to legally paying less in taxes.
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.
There is a common misperception that strategic tax planning is reserved for the ultra-wealthy, a luxury that only they could afford—but nothing could be further from the truth. In fact, that whole idea that strategic tax planning is only for big companies is a tax myth. While it is true that big companies can afford a slew of lawyers all sitting around a table, brainstorming ways to pay less taxes, small business owners can get the same benefits.
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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