Planning Ahead: 5 Ways To Reduce Your Tax Burden

Tax season is over! Now it’s time to start planning for the next year taxes. To many this might seem premature but planning ahead pays! Therefore many people are in a search for the ways of reducing the tax burden and the tax experts have pointed out many strategies that can be followed to save a considerable amount of cash from taxes. Here we discuss 5 ways to save money on taxes and if you really need to reduce your tax burden, the time you spend here is really worth it!

First and foremost, what you can do to start protecting your profits is put some in a qualified retirement plan. If you have a retirement plan, then you’ll be able to reduce your tax amount as the Self-employed business owners can contribute up to 20% of the total earnings to the retirement plan, but limited to $50,000. When it comes to the corporations, this amount has been lifted up to $250,000 as 25% of the total earnings. This particular amount will be deducted from your total earnings, so you’ll be able to reduce your tax burden by a large amount. Also you’ll be able to get a tax credit up to $500 to cover administration costs for the first three years by adding your employees to a qualified plan.

Employee health plans are the next position where you can have a tax deduction. This is one of the most overlooked tax credits. If you afford to pay an amount equal to 50% of your employees’ healthcare premiums, you will be qualified for a credit up to 35% of your taxes. According to the tax experts, this strategy may not suit for the business owners who are not paying for their staff’s healthcare premiums, but this is most suitable for the business owners who pay 25%-40% of their employees’ healthcare premiums.

Spending a money on your marketing campaigns can also be a good solution to decrease you tax amount while increasing your business revenues.  The key is to make sure you track the ROI (return on investment) to ensure to is an effective marketing program.  Therefore most of the Small-business owners that are smart in this process of pouring cash into their marketing budgets can have the tax amount deducted quite considerably coupled with effective marketing strategies.

In the previous years, there was a 100% bonus depreciation which facilitated the business owners to cover their all costs related with their businesses without additionally spending even a dollar and now it has been downgraded to 50%. If you are confused about the depreciation of the bonuses for your small business, now you don’t need to be worried about it. This is because according to the experts, the bonus depreciation which was downgraded to 50% will come back to 100% in near future. So it is better to keep all the records and documents of the equipment purchases while keeping eye on the latest business news updates and for sure, you’ll be able to have a big tax deduction.

Many entrepreneurs neglect calculating their small expenses and eventually without knowing, they miss the chance of deducting their taxes. Banking fees such as online transaction fees and checking account fees or other charges like PayPal fees that seem small at the time add up! All these small expenses must be included in your yearend budget if you want to keep your money. Another important thing that you should follow is tracking the mileage and calculating the cost according to the IRS standard mileage rate. You can use the Smartphone applications like MileBug, Trip Cubby to calculate the mileage and it would be better if you can add all driving costs with including parking fees to account. If you calculate all these expenses simply, you’ll be able to have the yearend budget with the accurate income. Therefore your tax burden also will be significantly deducted.

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Tax Savings Tactics for Small Business Owners

It’s a common situation that as soon as the tax time approaches, small business owners start losing their sleep over tax payments. If you are a small business owner, you may relate to this. That’s why, it’s always better to prepare well in advance, in order to face this crucial time of the year with courage. The key factor that differentiates a visionary business owner from the crowd is his ability to think ahead. To encourage this type of mentality and the spirit of thinking ahead, we have compiled a list of tax saving tactics. We are sure that these tactics would not only help you in saving a considerable amount of taxes but also make you a smart financial manager at the end of the day. The strategies are especially beneficial for end of the year taxes and Q4 tax payments.

In order to take full advantage of the tax savings; the most important thing that you should do is to keep track of the tax opportunities. There are several methods that you can employ to accomplish this. For instance; a tax diary, a tax diary is a wonderful way to keep you updated, about all the tax saving schemes and opportunities out there. Another important tool that should be in your arsenal is rock-solid tax organizer. As a business owner, you must already be aware of the importance of saving and keeping safe all your receipts and documents. Another thing is the knowledge and education of tax policies and deductions.  These may not provide you the overnight results, but can be a great asset in the long run. Above all, who can underestimate the importance of a good tax advisor? A good tax advisor is the person who is always willing to listen to your side of the story, your views and your plans, in addition to offer his suggestions. There is nothing better than having a Hoffman and Associates to handle and mange your income tax process. It’s always recommended to communicate regularly with your financial advisor or bookkeeping service. Prepare a checklist of the things with their help that you may need at the time of tax payment. This strategy will be very helpful in preventing the chaos and confusion that may arise during the eleventh hour of tax payment.

To prepare you well for the tax payments, it’s often recommended to get enrolled in one or more benefit plans. These plans can save you a significant amount of tax breaks. Contributing in a defined benefit plan is always a better idea than to contribute in a contribution plan, especially if you are a small business owner and you are over 50 years of age.  The reason is that you can contribute more in defined benefit plan. More contributions effectively means more tax savings.

Another income tax aspect that can cost you heavily is your purchasing decisions. Although in most of the tax plans, making purchases for your business is considered as a tax saving tactic. However, it is highly recommended to take the recommendations of a professional tax advisor before making any big purchases. Lastly, in case of 1099 employees, it’s recommended to set up your quarterly payment estimates; if you haven’t already done so. This will effectively help you in sorting out your cash flow, which in turn can prove to be beneficial for substantial income tax savings.

For general tax deductions, experts are of the opinion that you should enroll in a simplified employee pension plan (SEP). This approach plays a very important role in tax saving benefits for your contribution. Most importantly, a small business owner should be smart enough to take advantage of minor tax saving opportunities that come his way, such as incurring costs in dry cleaning or certain educational events for the employees, mileage deductions for driving etc. These minor opportunities would add up eventually to make a substantial difference.

As far as the yearend tax payments are concerned, remembering little things can make all the difference. For those, who have received salaries this year; tax relief act of the previous year would be applied. While in 2011 there was 100% depreciation bonus on any purchase for the new equipments and machinery for the business. That’s why it was considered to be the best time for making big purchases. But you don’t need to worry if you haven’t done so. In 2012 the depreciation bonus may fall down to 50%, but according to experts, it can again go back to 100%. That’s why it’s not recommended to repeat the mistake of the previous year.  Make a list of equipment  and machinery that you think would be beneficial for your company and keep your eyes and ears open for the announcement for depreciation bonus.

This is only a preview of the ways, in which you can save substantial amount of tax. In depth study and implementation of these techniques can effectively maximize your tax savings.

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Retirement Planning for Entrepreneurs

Retirement Planning Options for Entrepreneurs

Retirement is an inevitable event, whether you are an employee or a business owner. Therefore, a visionary individual is the one who prepare well in advance to tackle this inevitable end. While for employees the process is often not complicated because their retirement schemes are often taken care of by the company management, where they work. All they need to do is enroll for a retirement pension program such as 401(k) and the mentioned amount of money would be automatically cut from their paycheck, for the deposit. The system works so efficiently that most of the times the employees don’t even know about the deductions.

Having said that making retirement decisions can be really hard if you are a business owner or self employed. Part of the reason lies in the fact that, as a business owner you’re always occupied with so many other important tasks that planning for the retirement often takes a backseat. However, for a business owner, the responsibility to do so is much greater more than that in the case of employees. Investing your time and money in retirement pension plans can make a lot of sense for a business owner, because usually these plans come with an added advantage of tax exemption.  In the beginning the choices and options may appear overwhelming to you, but once you get familiar with all the different plans and policies, you will be happy that you spent the time to make the right decision.

Let’s have a look at the various options that are available in the market for retirement income plans. The first option among them is simple IRA plans. This is the best option if you are a small business owner and have less than hundred employees, this plan can save you up to $11,500 annually. The best approach that most of the business owners take to get the maximum tax benefits is by enrolling their employees also in this plan as well. However on the downside; you may not avail the benefits of additional plans for retirement. SEP IRA is another retirement option for the business owners as well as their employees. In this plan the contribution amount is up to 25% of the compensation. However, to qualify for 25% contribution, the total amount should be under $ 49000.

Another excellent option for retirement planning is Simple (401 k). Although the plan is quite similar to Simple IRA there is an added advantage of taking loan. The loan can be taken against the balance in the account. This type of provision is not present in simple IRA plans. If you happen to be self employed and you don’t have any employees working for you then single participant (401 k) will be the best option for you. The plan is much better than simple IRA in terms of higher limit for your savings. The limit is up to 16500 annually. To save even more tax in this plan you can opt for making contributions as much as 25% of the compensation, and of course the maximum amount must be less than $49000 to avail 25% contribution.

If the above mentioned plans appear too complicated and inundating to you. You can always take consult a professional tax advisor or an accountant. In fact, it’s always recommended to take the help of a professional to handle these affairs for you.

Believe it or not, your business itself can prove to be the biggest asset for you, for all your retirement needs. The first option that you have is; you can sell your business itself to fund your retirement years. However, if you think that would be a heart wrenching decision for you then try to appoint a competent manger to run the business for you. So that you can sit back and relax in your retirement home while still getting paid from your business. If you are thinking of these options, it’s still wise to invest in one or more retirement investment options mentioned above. This is essential to provide you the security and the insurance that you would need, once the retirement time finally arrives.

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Finding An Accountant You Can Trust In San Diego

Finding An Accountant You Can Trust In San Diego

It’s tax time and for sure, you may be busy making your tax and financial planning decisions. But for those who are trying to find an accountant in the San Diego area it can be stressful.  Who can you trust to handle your tax preparation and financial needs?  Who will have the experience and still be affordable? Who can help you handle your accounts; organize expenses, receipts and deductions? Before you choose a certified public accountant or someone who just took a one week course by going online and searching, it is best to know what you should be looking for.  So, when you need to find the best person to handle your taxes, the following suggestions are worth keeping in mind.

There are two main ways of locating an excellent accountant that people tend to use is through networking and through referrals.  Referrals are an excellent way to locate the best accountant, as you can get clarification about the accountant by talking to other businessmen who are in the same industry. Also you can make sure whether the person you are hiring has the experiences in your industry and experience with your entity or form.

If you don’t have enough contacts in your industry, all you have to do is reach out to your local Chamber of Commerce and introduce yourself.  You’ll be able to meet number of qualified accountants and would have been hard to connect with otherwise. This is because most of the accountants don’t spend a lot of money on marketing, but they often invest in registering at the Chamber of Commerce.

When it comes to the selection process of an accountant or financial services in San Diego, interviewing candidates is the most important task. The experts have revealed that it is important to interview a few candidates before making the final decision. You have to always keep in mind that the accountants are not just for tax preparation, but they should have the capability of helping you in the decision making process of your financial activities. Therefore you’ll have to examine them and how knowledgeable they are.  This can often be done using the free consultations with each candidate, to see how their capabilities and competencies are. There are some key questions that you should ask from an accountant at the interview before you recruit one.

The first question that you should ask is; how is your tax preparation different from others or from the big box chains? Many tax preparers are people who are just hired to arrive in the tax season and get the business owner the biggest feasible return and then leave the business. But he’s not the person that you could rely on all year. Even if that is the extent of your needs it’s often better to find and accountant in San Diego that has a deep knowledge of taxes to give you the insight you’re looking for. If you are able to get an accountant with strategic advising skills who can see every angle of your entire business and who will be able to guide you to the success, then you’ll have someone in your corner for years to come.

Experience in related industries; is the second question that you should ask from the candidate.  This is because not all the accountants are equally talented to perform well in every industry, so that you have to clarify whether he or she has the capabilities of performing well in your business niche.  The best way to clarify this is by asking about the previous experiences and it is highly recommended to asking for referrals of the other business owners who has hired the particular professional previously.

As for the third question, you can inquire who will be “performing the work personally?” This is because whenever you face difficulty or have questions you will want to communicate closely with who is really doing the work.  Finding the right business accountant or accounting firm in San Diego that will fulfill all the tasks with high efficiency and as well as the effectiveness is a must. If you hire an accounting firm, keeping the relationship with owner or partner of the firm will often lend itself to better support in reaching your businesses goals.

The final question is; what added value can you bring to the table? Experts highly recommend asking about the services what they can offer outside of tax season. Also it’s better if you can ask whether they can come to your business quarterly to examine your financials, whether he or she can examine the sales or production and provide the expertise planning and forecasting.  Keeping a good working relationship with your accountant will help make the tax season far less painful, take the worrying out of managing your bookkeeping and allow you to focus on other tasks.

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