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.
Tax Financial PlanningLong-range tax financial planning involves strategically placing liquid assets where monies can earn the greatest return. Investing in mutual funds, stocks and bonds, purchasing real estate, and saving for retirement or college are all smart moves for consumers who want to minimize tax obligations over the long haul. Most individuals spend a lifetime earning as much money as possible, but few are aware of the legal means of protecting assets and keeping the government from dipping into savings. There are three major ways to minimize taxes: reduce net taxable income, investigate and take advantage of all allowable credits, and increase deductions by itemizing every allowable expense.
Thousands of taxpayers fail to take more than standard deductions simply because of a lack of knowledge about federal and state credits. A prime example is the Earned Income Tax Credit (EITC) which helps taxpayers without children reduce taxable income. Military personnel and ministers also qualify for EITC. The Child Tax Credit makes parenting just a little more appealing and provides a credit of up to $1,000 for qualifying child. Grandparents under the age of 65, foster parents, siblings raising younger brothers and sisters, and biological Moms and Dads can all reduce taxable income by taking advantage of the Child Tax Credit. While "rendering unto Caesar the things that are Caesar's" is commendable, protecting personal finances through tax financial planning is not only legal, but also wise and prudent. "For wisdom is better than rubies; and all the things that may be desired are not to be compared to it. I wisdom dwell with prudence, and find out knowledge of witty inventions" (Proverbs 8:11-12).
Younger workers who want to enjoy the golden years without taking a part time job at a fastfood restaurant can begin tax financial planning by saving money in an employer-provided 401k, IRA, or Roth IRA. Individual Retirement Accounts allow individuals to stash away up to $5,000 per year (until 2011), tax-free, for a nice little nest egg. Tax-deferred retirement savings are only taxable after the account holder reaches age 59 1/2, or if monies ara withdrawn early, in which case savers are assessed a penalty. In spite of the housing market crisis, buying and selling real estate is still a good way to keep the government from excessively taxing assets. Smart sellers can utilize prudent financial planning to lower capital gains taxe on home sales and spread payments out over several years after the sale.
Short-term tax financial planning includes increasing the number of dependents on 9-to-5 employment so that more money is taken out during the year. At the end of the year, individuals who increase dependents allowed by law will usually wind up getting a refund or owing much less to the government than those who claim fewer dependents. Of course, the Internal Revenue Service may take a closer look at a single man claiming an excessive number of dependents that are not in residence at least six months out of the year.
While most taxpayers dread pulling out records and receipts to prepare returns, there is a benefit to itemizing as many deductions as possible. The more deductions claimed, the less net taxable income to report. Self-employed individuals and those with home businesses frequently neglect to take deductions for gasoline, travel and meals. Deductions for a home office, no matter how small, can also reduce net taxable income. Simply measure the in-home office, figure the percentage of the home's total square footage, and take a deduction equal to that percentage of all utilities, mortgage, and other household expenses.
Big spenders who want to shield liquid assets from Uncle Sam should look into offshore tax planning. Taxpayers usually pay revenue on capital assets owned in the country in which they reside; but the rich and famous have discovered a way to minimize and eliminate paying revenue by investing money into offshore properties. Exotic islands may be the playground for the wealthy, but they are also prime low tax jurisdictions. The islands of Barbados, the Turks, and Caicos; Switzerland; Canada; and China all offer investors seeking to minimize or reduce taxes a place to dispose of wealth which would normally be heavily assessed in the U.S. The savings are so substantial that corporations routinely move operations offshore to shield assets.
International or offshore tax planning is perfectly legal; however investors have to do some homework to assess whether foreign locations are suitable for long-term asset protection. Offshore financial advisors can help U.S. corporations select the best sites for international business operations. International holdings are safer in locales with stable political governments that allow Americans and other foreigners to purchase and own land or capital assets. U.S. investors should ascertain whether the locale is easily accessible by public or private airlines and establish a good relationship with offshore bankers and financial institutions. The U.S. dollar value is also a prime consideration. Even though offshore tax planning can provide opportunities to amass and protect large amounts of capital assets, properties are only as valuable as the foreign locale's monetary exchange.
Individuals and entrepreneurs seeking to keep as much annual earnings as possible should seek the advice of financial planning professionals who can suggest a myriad of ways to protect assets. It is never too early to begin long-range planning; and the sooner individuals begin securing a financial future, the sooner the benefits of sound fiscal management can be enjoyed. Businesses desiring to avoid paying excessive revenue should include offshore tax planning as part of a sound fiscal strategy. A small percentage of assets placed in a low tax jurisdiction can net excellent returns without incurring liability.