Mid Year Tax PlanningSummer is in full swing and taxes may not be highest priority. That is a mistake!

The mid-point of the year is the perfect time to look at the big financial and tax picture of your business and take action to save taxes. If you wait until the end of the year, there may not be enough time to implement an effective strategy.

 

Re-Evaluate Your Legal Entity.

Businesses evolve. An entity that worked in the past, such as a proprietorship or partnership, may no longer make sense. Transitioning to another entity, such as a corporation or LLC, may shelter financial risks and income taxes. Failing to do so may be costly. Thoroughly review your options and take your time doing so. Discuss them with a knowledgeable accountant now so that a change can be in place for the beginning of the next new year.

 

Take Charge of your Recordkeeping.

To maximize your business tax deductions, you need good records. If you are not up-to-date, get caught up now.  Otherwise, you may find yourself struggling with a large, burdensome task. Consider handing it off to accountant to focus on business growth. Don’t wait until the end of the year and hand off the proverbial shoebox.

 

Issue More Stock.

If you are a C corporation, you may qualify to issue stock that will allow the stockholder to obtain tax-free treatment of any capital gain. It is referred to as qualified small business stock (QSBS) or Section 1202 stock. After holding QSBS stock for at least five years, the gain from the sale of stock is tax free to the stockholder. By issuing QSBS stock, a small business can raise capital from new investors.

 

Analyze Your S Corporation Salary & Distributions.

If you are a S Corporation, make sure that the salary and the distributions you pull out of the business are optimal. Otherwise you may be paying higher taxes or be at higher risk for an audit than is necessary. Start attacking any problems now to lessen any cash flow impact over the balance of the year! (This can be a complex subject. Discuss at length with an accountant that understands S Corporations).

 

Max Out Retirement Contributions.

Contributing to a tax-advantaged saving plan (401K, SEP, etc.) is one of the smartest moves one can make to reduce taxes. The amount of money that can be contributed to a plan can be substantial. Make a decision on a plan that suits your needs and start salting away the money now. The smaller monthly contribution will be easier to budget.

 

Plan Equipment Purchases.

IRS allows generous equipment write-offs. A business owner can expense up to $510,000

of equipment purchases instead of depreciating over a number of years. To take advantage of this write-off a wise purchase plan should be crafted and implemented over the last half of the year.

 

Don’t Overlook Tax Credits.

There are a number of tax credits that can be used to help your business. This was covered in a blog in 2013 and is still relevant.
5 Tax Credits Overlooked by Small Business.

Our thoughts might be with backyard barbeques and fun vacations in July. But do you really want to find out later you could have lowered your tax bill if you had acted sooner?

Summer is a perfect quiet time to make an appointment to see John J Kasperek and his staff for a mid-year tax