Combine my business and personal trips?

A great question that I get from my bookkeeping and payroll savvy clients in San Diego is how to combine business and personal vacations you always wanted to take.  It has big tax implications and is important to have a financial guide like Hoffman and Associates walk you through the process. While it’s possible to pull this off there are some very important factors to consider.  Careful planning and preparation can help you save on your trip by allowing you to write off a significant portion of the cost of the overall vacation.

To start with the primary purpose needs to be a business trip and your simply integrating your personal one too.  Doing it the other way around can cause more trouble than it’s worth.  Keep that in mind!  If you’re traveling in the United States, and the primary reason is business then your good so far.

Next you should be prepared to keep record of every transaction that occurs for the trip.  It can be burdensome for many, but good recordkeeping pays off!  Keep in mind this just applies to business travel domestically. Here are the four details that you will want to have a paper trail for.

1. Destination

2. The dates of the trip

3. Reason for travel and what is to be gained from it

4. Costs of travel, meals and lodging.

When it comes to planning the trip there is nothing wrong with you staying the weekend and enjoying the area.  You use that long weekend and enjoy a theme park or go camping.   If done this way your airfare is fully tax deductible and mileage becomes deductable at 55.5c per mile.  The benefit to using mileage is it allows you to take more people with you at no additional cost.  Flying would incur another expense that can’t be used as a deduction! So you can see the clear benefit of driving if the family is coming too.

Another way to have a business and personal trip together is to plan it around some continued learning program.  If its educational then it is a legitimate business expense.  Even if a conference is held in a resort area it doesn’t matter because the purpose is business.  You are free to work all day and play that evening!

I hope this helps you understand how to integrate business and personal trips, it’s all about how you do it.

For small businesses in San Diego that need this kind of insight in their bookkeeping and payroll simply give Hoffman & Associates a call!

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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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