Corporate Tax Planning
Corporate tax planning provides strategies that are significant in minimizing taxes. Some valuable ways to save include sponsoring a retirement plan, writing off company assets, claiming depreciation expense, taking deductions on business automobiles, office expenses, self employment health insurance, employer sponsored child care resources, and using a home office for the company. Business tax planning involves understanding what it means to be self-employed. A company owner needs to be aware of anything that might impact taxes paid. Self-employment tax, company expenses and deductions, business assets, charitable contributions, shifting income, and retirement planning are important considerations. "If any of you lack wisdom, let him ask of God, that giveth to all men liberally, and upbraideth not; and it shall be given him" (James 1:5).
Self-employment tax is due from those who are receiving income as an independent contractor, sole proprietor, or anyone who is conducting business through selling services or products. Corporate tax planning provides some ways that a business owner can save on income taxes both short-term and long-term. Income received must be reported but deductions can reduce the amount that is actually owed. The deductions can vary depending upon the type of industry and what are considered legitimate deductions.
Some company owners shift income to a family member as a tax advantage. In order to do this a family member must be providing some benefit to the business and the amount should be in line with the type of compensation. Shifting income legitimately can lower a company into a lower tax bracket. Of course the shifting of income to a family member could raise their income bracket and this should be considered. This is a business tax planning venture that should benefit both parties and should be done ethically and reasonably. To shift a large amount of income to a family member just to avoid paying taxes would be unethical unless there were a legitimate reason such as payment for services.
A retirement plan is a tax advantage to a person who is self-employed. This can be done with or without employees. However, it would affect the type of plan that is embraced. A self-employed person can place pre-tax dollars into a retirement account. Having employees mean providing for them the capability of doing the same. A company owner can also choose other employee benefit plans to attract employees. Corporate tax planning involves looking out for employees by offering retirement, cafeteria and medical benefit plans. Cafeteria plans allow employees to use a portion of pre-tax income for medical or child care expenses. Corporations do not have to pay payroll taxes or workers comp premiums on the dollars that are paid into a cafeteria plan or medical benefits plan.
There are many deductions that a company can take advantage of including startup costs, business trip expenses, home office use, the use of automobiles, and other assets. The costs of health care expenses are often deductible especially for the owner and dependents. In addition, any contributions made to a health savings account are also deductible expenses. Business tax planning includes knowing what plans provide the greatest benefits and implementing those plans to not only provide benefits to the company but benefits to employees as well.
When starting up a company many of the initial expenses can be written off up to a certain dollar amount. Some of these may include personal property like furniture or office equipment. Other things that can be written off the first year of purchase include machinery, fixtures, storage facilities, and other personal property. Other considerations when starting up a business include travel, vehicle usage, home office, and uniforms. Corporate tax planning sources suggests making sure that write-offs are legitimate business expenses. When using a home office for company use only a percentage of expenses can be written off. Travel expense can only apply when the travel is for the company. Combining company business with personal business must be taken into consideration for any type of write-off to be legitimate.
There is a degree of burden that is felt from tax legislation by any and every owner. However, there are positive ways that a corporation can comply with obligations and find ways to develop a strong company otherwise. Business tax planning includes taking advantage of opportunities to provide relief when possible. A corporate planning attorney can provide some good advice on how to structure a company to be optimally successful while remaining compliant with considerations such as paying taxes. Information can be found on the Internet that can help prepare a new business owner with how to be compliant in every area when it comes to reporting income and deducting expenses.
Charitable contributions are a great way for a company to save on taxes and help those in the community. Many non profit organizations are set up to help those who are less fortunate within the community that they reside and some offer services to anyone who they can help no matter where they are located. There are limits on how much of a contribution that can be counted and the organization has to fit the guidelines used by the IRS to be considered a legitimate charitable organization. Some of the ones who usually do qualify are churches, educational companies, scientific or medical research institutions, those that provide true charitable services and organizations who help animals. There is more information on the Internet about organizations that truly qualify as charitable.