strategic tax planning

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.

How America’s Companies Pay Less in Taxes Than You with Strategic Tax Planning

You Are Paying Too Much In Taxes

The truth is that you are playing too much tax, maybe even thousands more per year than the law requires, and it’s likely you’re not taking advantage of every tax break you can. Major corporations have teams of lawyers and accountants that scour the tax code, looking for every tax break they are entitled to. The tax code is thousands of pages long, of course, with thousands more pages of regulations and IRS guidance. The truth is that most tax advisors aren’t very proactive when it comes to saving their clients money by leveraging the tax code to their advantage. The good news, however, is that there’s a better way, and small businesses can use strategic tax planning just like major corporations.

Major corporations understand that owning your own business is the biggest tax shelter left in America, and they make sure to take advantage of what they have. With strategic tax planning, you can learn how your business can make the right tax choices to save you money year after year. Tax planning guarantees results — and what other business plan makes a guarantee? Now, in order to reap the benefits, your business needs to start with a strategic tax-reduction plan, a Tax Blueprint® from Financial Gravity.

Many small business owners may feel fear or trepidation about tax planning, likely worrying that it could increase their likelihood of being audited. The truth is that audit odds are low overall, and most legitimate deductions aren’t likely to send up ‘red flags.’ For the fiscal year 2014, the overall audit rate was just one in every 100 returns. Of those audits, roughly half focused on the Earned Income Credit for working families. The bottom line is that you should never be afraid to take a legitimate deduction.

Expensive Mistakes

Choosing the wrong business entity or the wrong retirement plan, missing medical benefits, home office, vehicle expenses, and meals and entertainment all add up to be costly tax mistakes. Most businesses start as a sole proprietorship and then become a limited liability company or corporation as they grow, but do you know if you’ve chosen the right business entity? Choosing the right business entity involves all sorts of tax considerations, and it’s important to make sure you’ve made the right choice for where your business is now.

Are you using family employment for your business? Family members need to be at least 7 years old, but hiring your children or grandchildren can provide a great way to cut taxes on your income by shifting it to someone who pays less. Did you know that you could be writing off medical bills as business expenses? You can with a Medical Expense Reimbursement Plan, or Section 105 Plan. Your home office is also deductible if it is your principal place of business.

Every year AAA researches vehicle operating costs, and for anyone driving something larger than a small sedan, if you are only taking the standard allowance you are losing money. In 2016, when the standard allowance was 54 cents per mile, these types of vehicles had an operating cost of 58.1 to 71.0 cents per mile. Only the small sedan had a lower operating cost of 44.9 cents per mile.

Most business owners know they can deduct the cost of meals they host with a bona fide business purpose, but what about when they entertain at home? Those meals can be deducted, too, because there’s nothing that says business meals must be eaten out.

Failing to plan is the biggest mistake most small business make with their taxes, and the reason they pay thousands more per year than required. Financial Gravity uses the IRS Tax Code to ensure you pay only what you must. All it takes to get started with your own strategic tax plan is a quick, free assessment. Contact us today to get your Tax Blueprint®!

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