Super Smart Tax Strategies – Smart finance management is an inevitable part of the life of every successful business owner. To bridge the distance between your business and success, it is important that you think beyond growing your income, saving for the future expenses and investing wisely. You certainly cannot grow without paying attention to your taxes. Why, you ask? Let us enlighten you about the importance of taxes and 4 impeccable strategies to manage them like a pro.
Taxes account for one of the biggest expenses for any business owner, and thus, they can have a significant impact on your profit margins. If you want to guard your hard-earned money against the strict tax norms imposed by the government, you need to implement some smart tax strategies as soon as possible. However, experts suggest that you must always start by consulting a qualified tax professional before making any rash decisions.
Many US businesses are playing safe by hiring skilled tax preparers in India, and outsourcing the entire process. This blog includes 4 strategies that can help you achieve your financial goals by reducing your tax liability and increasing your cash flow. These strategies are based on the current tax laws and regulations, but they are subjected to alterations in the future:
Table of Contents
Strategy 1: Maximize your retirement contributions
One of the best ways to lower your taxable income and save for your retirement is to contribute as much as possible to your retirement accounts.
If your company is one which opts for offshore tax preparation, the remotely working experts will offer you a few ideas. These depend on the type of your business entity and the number of employees. Here are a few great moves:
> Solo 401(k): Highly beneficial for small business owners or self-employed individuals, this plan is a lifesaver for those who might only be working with their spouse, and no other employees. You can contribute a maximum of $20,500 as an employee and up to 25% of your net self-employment income as an employer for a total of $61,000.
> SEP IRA: This plan is devised to benefit small business owners or self-employed individuals who are working with just a handful of employees. You can contribute up to 25% of your net self-employment income or 20% of your AGI (adjusted gross income), whichever is lower, for a maximum of $61,000. Hiring a remote tax preparer can prove to be very helpful in these situations.
> Simple IRA: This is a different plan for small business owners with 100 or fewer employees. You can contribute up to $14,000 as an employee and up to 3% of your net self-employment income as an employer, for a total of $29,500 only.
> Traditional IRA: This is a plan for anyone who has a demonstrable source of income and is under 70.5 years of age. In case you find all of this exhausting, you can always follow other savvy business owners and outsource taxation work to India!
Strategy 2: Deduct all business expenses
Another way to bring down your taxable income is to deduct all the legitimate expenses spent on your business operations including:
- Advertising and marketing costs
- Business travel and entertainment costs
- Office rent and utilities
- Supplies and equipment
- Insurance premiums
- Professional fees
- Taxes and licenses
- Interest on business loans
- Depreciation on assets
- Employee wages and benefits
To claim these deductions, all you need to do is keep accurate records of all the receipts and invoices of expenses that are necessary for your business. To avoid any confusions later, you can separate your personal and business expenses and use a dedicated bank account and credit card for your business transactions.
Strategy 3: Take advantage of tax credits
Tax credits are different from tax deductions as they directly reduce your tax liability monetarily rather than reducing your taxable income. Therefore, they are more valuable than deductions and can help you save BIG on taxes.
Be smart and get taxation outsourcing companies in India to do all of these for you and save money.
Some of the tax credits that you may qualify for are:
- R&D credit: This credit applies to businesses that are working towards qualified research activities that aim to improve or create new products, processes, techniques, formulas or software. The credit is equal to a percentage of the qualified research expenses that exceed a base amount.
- Work opportunity credit: This credit is designed for businesses that hire employees from specific groups that face barriers to employment such as army veterans, disabled people, or long-term unemployed individuals. The credit acquired is equal to a pre-decided percentage of the wages paid to these employees during their first year of employment.
- Small employer health insurance credit: This credit is available for small businesses that provide health insurance coverage to their employees. The condition is that the employers have to pay at least 50% of the premiums. The credit is equal to the percentage of the premiums paid. Which can vary on the number of employees and the average wages offered to them.
Your tax preparers in India will guide you on which policies suit you the best. By taking advantage of these and other legal tax credits. You can significantly lower your tax liability and increase your profitability.
Strategy 4: Make time for succession planning
Super Smart Tax Strategies – All successful business owners move ahead with strong and steady retirement plan. However, without proper planning, you might fail to accomplish this vision, and your business may face various challenges like:
- Loss of leadership and direction
- Disruption of operations and cash flow
- Conflict between your business partners or family members
- Tax liabilities and legal fees
To avoid these problems and ensure a smooth transition of your business. You need to plan for your succession well in advance. This is something tax services in India excel at.
The principal points are these:
- Identify your goals and objectives for your business and personal life
- Choose a successor who can take over your role and responsibilities
- Train and mentor your successor/successors to prepare them for the future
- Create a written succession plan that outlines the terms and conditions of the transfer of ownership and management.
Conclusion – Super Smart Tax Strategies
Taxes are an inevitable part of business, but they certainly don’t have to be a burden. We are sure that by implementing the above-mentioned strategies, you can achieve your desired financial goals. Save even more by investing in a remote tax preparer who can analyze your specific business situation in reference to the current tax laws and regulations.