Small businesses have a lot on their plate without having to worry about the IRS. But, worry you should because they are worse than the mafia. Sure, the Internal Revenue Service doesn’t break legs or murder people, but it can be as threatening. Miss one payment and your entire career will be in jeopardy. Seriously, these men and women don’t play.
The answer is simple, isn’t it? Keep up to date with the firm’s tax commitments and don’t miss a payment. It couldn’t be any simpler when you put it like that. Of course, companies are aware of their responsibilities and how much they owe, yet still struggle because the numbers are huge. While businesses such as Apple and Facebook dodge it, you’re stuck shouldering the burden.
One avenue available to owners of small and medium-sized companies is to cut the bill. As illegal as this may sound, it’s legitimate as long as you follow the advice underneath.
Reducing tax commitments is so legal that the IRS allows you to do it in the open. It’s called claiming expenses, and everyone from an individual to an organization participates year after year. The odds are that you already know about this trick, but there’s a chance that you are unaware regarding some of the inclusions. For example, we all understand that gas is deductible if the vehicle is sued for work purposes. Did you know that the car itself is also fair game as long as you can prove it? Driving instructors use trick every couple of years to ensure their tax bill never gets too high. And, you can do the same by investing in a fleet of company vehicles. Remember that the savings have to be bigger than the initial expenditure for this to work. Or, it has to pay out in the long-term. There are plenty of deductibles and Small Biz Trends has a list.
Make An Investment
A pipe dream it may be, yet plenty of small businesses have money lying around in accounts. Usually, it’s a big enough amount to cover a large, unforeseen expense. And, it’s an incredibly savvy and wise move to make because you never know when disaster will strike. Still, wouldn’t you rather make money from the bundle? Better yet, wouldn’t you prefer that it wasn’t taxable? Well, both are doable as long as the money is invested rather than transferred to a bank account. The main reason people take their first steps into CFD’s is that they are tax efficient. Usually, there is no duty to pay, although the profits are liable. However, investments that fail are deductible from a bill if you have more than one business. So, there’s a silver lining even if it goes wrong.
Rent, Don’t Buy
When the company owns assets, they are subject to tax laws. Think about an office and the expenses which are involved in holding one. The same isn’t true when the business’s belongings aren’t their own, that is to say when you rent rather than buy. Sure, the monthly rent will reflect the fact that the landlord has tax to pay, but it won’t be the same as paying the full amount. In many ways, this is a deduction as it’s one less asset to worry about when the deadline arrives. The same goes for equipment such as machinery as well as vehicles.
What happens when a major corporation doesn’t like new tax legislation? It moves abroad to a tax haven. As deplorable as some people find this tactic, it is by no means illegal. Indeed, as long the company fulfills its obligations abroad, then it is pretty much bulletproof. Expansion isn’t something to try if the business is struggling and is in the red. Even if times are good, too much growth can lead to collapse. However, if there is a feasible base outside of the country, it may be worth considering. That way, the majority of processes can go through the HQ and reduce tax your commitments.
When you created the business, the odds are high that you used an LLC structure. It’s easy to see why, particularly when it gives owners protection from asset liability. But, as the company grows, being a limited company may not be the best option tax-wise. Inc recommends switching to a C corporation model as it lowers the income rate to 15% rather than the standard 35%. A 20% drop is a big reduction for any firm whether it’s an SME or a massive conglomerate.
Now that you know the hacks, how are you going to use them to your advantage?