What Every Small Business Owner Needs to Know About Tax Planning
At Ivy Ridge Asset Management, our financial planners are dedicated to building and preserving the wealth of our small business clients throughout New York. While many small business owners tend to ignore tax planning until they meet with their accountant, tax planning is an ongoing process that can serve as a highly valuable commodity to any business. While there are countless tax planning strategies available for business owners, no two strategies are alike, so it’s important to meet with an experienced advisor to successfully assess the tax planning goals of your business.
Reduce The Amount Of Taxable Income
Tax obligations go hand-in-hand with running a small business. From abiding by the tax laws of the federal government, all the way down to those mandated by city hall, it’s critical for business owners to stay on top of their finances in order to successfully grow their business. With the tax laws constantly changing due to major legislation and IRS rulings, many tax break opportunities exist that you may not be aware of. When you work with an experienced financial planner, they’ll do everything they can to reduce your business’ taxable income so you can keep more of your hard earned money.
Lower Your Small Business’ Tax Rate
If you’re interested in reducing your small business’ tax rate, a certified financial planner can help. While federal income tax rates can vary dramatically, from as low as 0% to as high as 39.6%, your business may qualify for a variety of tax breaks and deductions that could save you a tremendous amount of money.
Claim All Available Tax Credits
While many small business owners tend to believe that tax credits are only targeted and available to large businesses, this is simply not the case. Small business can receive tax credits for providing things such as health insurance, retirement planning, child care services and even providing easy access for the disabled. When you obtain certain tax credits for your business, you can reduce your company’s taxes dollar for dollar, which is something a tax deduction cannot do. If you’re not sure which tax credits your small business may qualify for, contact the financial advisors at Ivy Ridge Asset Management in Rhinebeck today!
Control The Effects of Alternative Minimum Tax
In 1969, Congress took notice that one hundred and fifty-five people with high incomes were legally using so many deductions and tax breaks that they were paying literally nothing in federal income taxes. It was because of this that Congress instituted the Alternative Minimum Tax (AMT), with the hopes of making the tax system more fair. This parallel tax system operates within the shadow of regular taxes, expanding the amount of income that is taxed by including tax-free items in the calculation.
- If you’re interested in figuring out whether you owe any additional tax under the Alternative Minimum Tax system, you’ll need to fill out a Form 6251.
- If the tax calculated on your Form 6251 is higher than that on your regular tax return, you will have to pay the difference as AMT. This can result in you paying hundreds or thousands of dollars in additional taxes each year!
Utilize Small Business Tax Deductibles
Whether you’re in the process of launching a new business, or you’ve been running your own company for years, many business owners are surprised to see the amount of expenses that are actually tax deductible. Instead of stashing all of your business receipts in the shoebox under your desk, bring them to a certified accountant. Your accountant will be able to itemize your business deductions so you can not only save money, but also grow your company.
The Most Common Tax Planning Mistakes For Small Businesses
At Ivy Ridge Asset Management, we understand that tax planning for a small business comes with many challenges. With the variety of tax ramifications out there, if you’re not on top of your taxes you could be making serious financial mistakes. Our financial planners have compiled a list of some of the most common tax planning mistakes for small businesses, so you can make smart and informed decisions when it comes to your business’ tax planning strategy.
Meet Your Tax Filing Deadlines
Did you know that the IRS usually adds a penalty of 0.5% to 1% per month to an income tax bill that is not paid on time? Many small business owners don’t have easy access to the cash they need to pay their taxes on their due date. This can result in business owners not filing or paying anything to the IRS, which is a critical mistake that can lead to additional fines and penalties. When you work with a certified personal accountant or financial advisor, they’ll be able to help you set up a successful tax filing system for your company so you don’t get dinged with costly fines. A financial specialist will help you keep tabs on the bookkeeping and accounting functions of your company, which can make your annual tax planning much less stressful.
Keep Your Tax Records Current & Accurate
Keeping accurate and up-to-date records of your small business’ income and expenses is critically important to your company’s financial success. If you fail to keep tabs on taxes throughout the year, the IRS may find discrepancies in your tax reports that could trigger an audit or a closer examination of your returns. When you work with a certified financial planner, you can rest assured you’re getting professional help with your bookkeeping and accounting so you’ll never have to worry about unwanted penalties or fines down the road.
At Ivy Ridge Asset Management in Rhinebeck, we’ve helped hundreds of small business owners effectively strategize their tax planning efforts. We offer a full staff of registered investment advisors (RIA) who specialize in investment advisory and financial planning for small businesses, and we’re passionate about building and preserving the wealth of our clients. Whether you need assistance with tax planning, portfolio management or retirement planning, we can help. Browse our financial services online or contact one of our financial advisors today!