As a business owner, you know that taxes are a fact of life. But just because taxes are inevitable doesn’t mean that you can’t take steps to minimize your tax bill. By incorporating some good tax planning strategies into your business plan, you can save yourself a lot of money come tax time. Here are a few common tax planning strategies that all businesses can consider.
Utilize Depreciation.
One way to save on taxes is to take advantage of depreciation deductions. Depreciation is an accounting method that allows businesses to deduct the costs of certain properties and equipment over time. Depreciation deductions are taken over the useful life of an asset, which means significant tax savings in the long run.
Section 199A and the 20% Pass-Through Deduction.
The new Tax Cuts and Jobs Act created a 20% pass-through deduction for qualified business income from pass-through entities. Such entities include sole proprietorships, partnerships, LLCs, and S corporations. This deduction is available to businesses with taxable income below $315,000 for married couples filing jointly. Similarly, $157,500 for all other taxpayers.
Timing Considerations.
Another important consideration when it comes to taxes is timing. By timing your income and deductions strategically, you can lower your overall tax bill. For example, if you know you’re going to have a large expense in the upcoming year, you might wait to incur those expenses until after Jan. 1. Doing so, they can be deducted from your next year’s taxes.
Accounting Method Planning.
The accounting method you use can also have an impact on your taxes. If you use the accrual method of accounting, you can deduct expenses as soon as they’re incurred. Even if you don’t actually pay for them until later. On the other hand, if you use the cash method of accounting, you can only deduct expenses when they’re actually paid for.
Utilize Charitable Contributions.
Making charitable contributions is a great way to reduce your tax bill while also supporting causes that are important to you. Though, it’s important to keep good records so you can document your donations come tax time.
Pass-through Entity Taxes.
If your business is a pass-through entity you’ll need to be aware of the new pass-through tax deduction. This deduction was created by the Tax Cuts and Jobs Act. The main feature is that it allows business owners who qualify to deduct up to 20% of their qualified business income on their personal tax returns. In order to qualify for this deduction, though, businesses must meet certain requirements regarding their income levels and types of business activity.
So it’s important to consult with your accountant or tax attorney before assuming that you’ll be able to take advantage of this deduction. It’s also worth noting that the pass-through deduction is set to expire at the end of 2025. So it may only be available for a few more years. Therefore, if you think you may benefit from the pass-through deduction in the future, it may be advisable to act sooner rather than later. For more information about how the pass-through deduction works, check outthis article.
These are just a few of the many tax planning strategies that business owners can use to lower their overall tax bills. By taking advantage of depreciation deductions, strategic timing, and pass-through entity taxes, you can save yourself a lot of money come tax time. However, it’s important to consult with your accountant or tax attorney before implementing any major changes to your taxation strategy. As they will be able to advise you on which approach will work best for your individual situation. As Startup Tandem, we have a team of experts that may guide you through this process.Visit our website to learn more about how we can help you with your taxes.
From mom-and-pop shops to tech startups, small businesses are the backbone of the American economy. But what exactly qualifies as a “small business?”. When it comes to taxes, the answer isn’t always so clear. The good news is, we’re here to help clear things up. Read on to learn more about determining small business status for tax purposes in the United States.
Classification for Tax Purposes
The first thing to know is that there is no one-size-fits-all answer when it comes to classifying a business as small for tax purposes. That’s because the definition of a small business can vary depending on which tax code is being used.
For example, the Small Business Administration (SBA) defines a small business as “a firm that is independently owned and operated, is organized for profit, and is not dominant in its field.”
A business must fall below at least one of the SBA’s size thresholds in order to be considered small.
In general, these size standards are based on either the average annual receipts or the number of employees for a particular industry. For example, the size standard for businesses classified under NAICS code 541110 (Offices of Lawyers) is $7.5 million in annual receipts. This means that any business with annual receipts of $7.5 million or less is considered small for tax purposes in the United States.
However, the IRS has a different definition for small businesses that qualify for certain tax breaks. Under the IRS code, a small business is any business with less than $5 million in annual receipts.
So, what’s the magic number?
Unfortunately, there is no easy answer. The best way to determine whether your business qualifies as small for tax purposes is to consult with a tax professional or use the IRS’s Small Business Tax Center.
When it comes to taxes, there is no such thing as a one-size-fits-all solution. But with a little bit of research, you can figure out which category your business falls into. And once you know that, you can take advantage of all the tax benefits that come with being a small business owner in the United States!
There are a few other things to keep in mind when determining if your business is small for tax purposes. First, businesses can be small even if they do not have the organization of traditional corporations or partnerships. This includes sole proprietorships, limited liability companies (LLCs), and S corporations.
Second, businesses can be considered small even if they’re part of a larger organization. For example, let’s say your company has 500 employees. Only 20 work at the location where you provide your product or service. In this case, you would still be a small business for tax purposes because fewer than 500 employees work at your particular location.
Of course, this begs the question:
What if my business doesn’t fit neatly into either of these definitions?
Don’t worry, there’s still hope. The SBA offers a size standards tool that can help you determine whether your business qualifies as small based on its industry. Simply select your industry from the drop-down menu and enter your average number of employees or annual receipts (whichever is applicable). The tool will then let you know whether your business qualifies as small according to SBA standards. As an alternative, seek professional help.
Figuring out whether your business qualifies as small for tax purposes can be complicated. But don’t despair—the SBA’s size standards tool can help you get to the bottom of it. Once you know how your business stacks up, you can move forward. You will have confidence knowing that you’re taking advantage of all the tax breaks and incentives available to small businesses in the United States. If you still feel like you need additional information, our team of experts at Startup Tandem would be more than happy to help. Contact us today to learn more.
As a small business owner, you’re always looking for ways to save money and reduce your expenses. When it comes to taxes, there are a number of strategies you can use to minimize your tax liability. Here are 10 of the most effective ways to reduce your small business tax liabilities.
1. Employ Family Members
If you have family members who work in your business, you may be able to take advantage of certain tax breaks. For example, you may be able to claim childcare credit if you have children under the age of 13. You can also take dependent care credit for certain elderly family members.
2. Hire Veterans
Veterans can qualify for many different tax breaks, including the Work Opportunity Tax Credit (WOTC). To take advantage of this credit, you must hire a veteran who meets certain criteria, such as being unemployed for at least four weeks.
3. Use Tax-advantaged Accounts
There are a number of tax-advantaged accounts that can help you save money on taxes. For example, you can open a Health Savings Account (HSA) to pay for qualified medical expenses. You can also open a Flexible Spending Account (FSA) to set aside money for child care, medical expenses, and other qualified expenses.
4. Invest in Energy-efficient Equipment
If you purchase energy-efficient equipment for your business, you may be eligible for a federal tax credit. The amount of the credit depends on the type of equipment you purchase and the energy savings it provides. Also, you would be investing in sustainable equipment which would depreciate slower and have a longer lifespan.
Under Section 179 of the tax code, you can deduct the cost of certain business equipment and property. This deduction is particularly beneficial for small businesses, as it allows you to deduct the cost of equipment in the year it is purchased, rather than depreciating it over time.
5. Build a Retirement Fund
Contributing to a retirement fund is a great way to reduce your taxes. You can deduct up to $53,000 from your taxable income if you contribute to a 401(k) plan. If you’re self-employed, you can deduct contributions to a SEP IRA.
6. Focus on Healthcare
Healthcare expenses are one of the largest deduction categories for small businesses. If you offer health insurance to your employees, you may be able to deduct up to 100% of the premiums from your taxes.
7. Get Incorporated
Incorporating your business can provide significant tax advantages. C corporations are taxed at a lower rate than sole proprietorships and partnerships. In addition, shareholders of C corporations can exclude up to $75,000 of dividends from their taxable income.
8. Maximize Deductions
There are many deductions available to small businesses, so make sure you take advantage of as many as possible. Common deductions include office supplies, travel expenses, and vehicle expenses . Many small businesses are eligible for special deductions, such as the home office deduction and the self-employment tax deduction. Be sure to take advantage of all the deductions that apply to your business so that you can minimize your tax liability.
If your business has a net operating loss (NOL), you can carry the loss back two years or forward 20 years to offset income in those years. This can provide significant tax savings. Consider getting help from an expert to stay on top of all the deductions.
9. Charitable Contributions
Contributing to charity is a great way to reduce your taxes while also helping out causes that are important to you. You can deduct charitable contributions from your taxable income up to 50% of your adjusted gross income.
10. Stay Current on Tax Law
The tax code is constantly changing, so you must stay up-to-date on the latest tax law changes. This will ensure that you’re taking advantage of all the deductions and credits that apply to your business. You can stay current on tax law changes by reading tax publications and subscribing to newsletters from reputable tax sources.
Reducing your small business tax liability doesn’t have to be difficult—there are several strategies you can use to minimize your taxes. By taking advantage of deduction opportunities, utilizing tax-saving strategies, and staying current on tax law changes, you can ensure that your business pays its fair share but no more. If you need any help, our team of small business tax experts can assist you. Give us a call today.
Year after year, taxpayers fork over a chunk of their hard-earned income to the government in the form of taxes. And while it’s true that we all have to pay our fair share, there’s no reason why we can’t do some tax planning to ensure we’re not paying more than we have to. After all, every dollar counts!
One of the simplest—and most effective—ways to reduce your tax liability is by reducing your overall income. This can be accomplished in a number of ways, such as working fewer hours, scaling back on overtime, or taking a pay cut. Of course, this isn’t always possible or practical, but it’s worth exploring if you’re looking for ways to lower your tax bill.
Stay Within the Tax Brackets
The first step in effective tax planning is to understand the tax brackets. The federal income tax system is progressive, which means that taxpayers are taxed at different rates based on their income level. The higher your income, the higher your tax rate will be.
There are currently seven federal income tax brackets, with rates ranging from 10% to 37%. So, if you can keep your income within a certain bracket, you can minimize your tax liability. For example, let’s say you’re a single filer with an annual income of $50,000. That puts you in the 22% tax bracket. But if you can find ways to reduce your income to $40,000, you’ll drop down to the 12% bracket. That can save you a significant amount of money come tax time.
Increase Your Number of Tax Deductions Throughout the Year
Another way to reduce your tax liability is by increasing your number of deductions. This means taking advantage of any and all deductions you’re eligible for, such as those for home office expenses, charitable donations, and medical expenses. The more deductions you have, the lower your taxable income will be—and the less you’ll owe come tax time.
This includes both above-the-line deductions, which can be taken regardless of whether you itemize your deductions, and itemized deductions, which can only be taken if you itemize.
Take Advantage of Certain Tax Credits
In addition to deductions, there are also a number of tax credits available that can help lower your taxes. Some of the more common credits include the earned income credit, the child tax credit, and the American Opportunity Tax Credit (AOTC). Be sure to explore all the credits you may be eligible for so you can take full advantage of them come tax time.
The third tax planning strategy is to invest in tax-advantaged accounts. These are accounts that offer special tax benefits, such as the ability to grow your money tax-free or deduct your contributions from your taxable income.
There are a few different types of tax-advantaged accounts, including traditional IRAs, Roth IRAs, and 401(k)s. Each has its own set of rules and benefits, so it’s important to do your research to find the best option for you. But investing in one of these accounts can help you save on your taxes in the long run.
Tax planning is an important part of financial planning. By understanding the tax brackets and taking advantage of deductions and tax-advantaged accounts, you can save yourself a lot of money come tax time. As an accountant, it’s your job to help your clients do just that.
To Recap,
By following these three simple strategies—reducing your overall income, increasing your number of deductions, and taking advantage of certain tax credits—you can minimize your tax liability and keep more of your hard-earned money in your pocket come tax time. So why not put them into practice today? Your future self will thank you!
This article is for informational purposes only and does not constitute tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to your situation and your personal finances.
E-commerce has been a game-changer for businesses large and small. It’s created entirely new industries and upended traditional ones. It’s also had a profound effect on the field of accounting. In this post, we’ll explore how e-commerce has changed accounting and what that means for businesses today.
Data-Driven, Global, Complex
The biggest way that e-commerce has affected accounting is by making it more data-driven. In the past, accountants would have to estimate things like the cost of goods sold or advertising expenses. But now, with e-commerce platforms like Shopify, companies can track this data down to the penny. This has made accounting more accurate and allowed businesses to get a clearer picture of their finances.
E-commerce has changed accounting by making it more global. With businesses selling products and services all over the world, they need to be able to track their finances in multiple currencies. This can be a challenge, but there are now accounting software programs that can handle this for businesses. This has made it easier for businesses to expand their reach and sell to customers in any country.
Another way that e-commerce has affected accounting is by making it more complex. With traditional brick-and-mortar businesses, there are only a few streams of revenue to keep track of. But with e-commerce businesses, there are often dozens (if not more) of different ways that customers can pay for products or services.
This can make it tricky to track finances and ensure that all revenue is accounted for. With businesses selling online, they need to be able to track things like taxes, shipping costs, and return rates. This can be a challenge, but there are now accounting software programs that can help businesses keep track of all this data. Software such as QuickBooks, Xero, and FreshBooks has made it easier for businesses to track their finances and make sure they are compliant with tax laws.
How you should respond to this change?
E-commerce has changed the accounting landscape, but that doesn’t mean businesses should be afraid of it. In fact, embracing e-commerce can help businesses become more efficient and save money in the long run. Here are a few ways to do that:
1. Use accounting software: As we mentioned before, there are now accounting software programs that can make it easier to track your finances and stay compliant with tax laws. QuickBooks, Xero, and FreshBooks are all great options.
2. Hire an accountant: If you’re not comfortable handling your finances yourself, then consider hiring an accountant. They can help you keep track of your finances and make sure you’re compliant with tax laws.
3. Stay organized: One of the most important things you can do is to stay organized. Keep track of your income and expenses, and make sure you have all the documentation you need. This will make it easier to file your taxes and keep track of your finances.
4. Stay up to date: E-commerce is always changing, and new technologies are being developed all the time. Make sure you stay up to date on the latest changes so you can be compliant with tax laws and keep track of your finances.
5. Seek professional help: If you’re ever feeling overwhelmed by your finances, don’t hesitate to seek professional help. An accountant or financial advisor can help you get your finances in order and make sure you’re on the right track.
Overall,
E-commerce has had a positive effect on accounting. It’s made it more accurate and allowed businesses to get a better understanding of their finances. However, it has also made it more complex, so businesses need to be prepared for that when they make the switch to selling online.
E-commerce made the field of accounting more data-driven and complex, but also more accurate and transparent. For businesses, this means that they need to be extra diligent about tracking their finances and keeping good accounting records. But overall, the benefits of e-commerce far outweigh the challenges—especially when it comes to accounting!
If you found this blog, you know how important it is to get your books right and your E-commerce Accounting done right. There’s no denying that e-commerce is on the rise. In fact, By 2020, GroupM predicts that the total will have reached $7 trillion, or 25% of retail sales, and will reach $10 trillion worldwide by 2027. With such a large and rapidly growing industry, it’s no wonder that more and more businesses are turning to online platforms to sell their products and services.
But as any e-commerce entrepreneur knows, running an online business is not without its challenges. One of the biggest challenges is keeping track of your finances. After all, accounting is not exactly the most exciting part of running a business. But it’s a necessary evil if you want to keep your business afloat.
That’s where an accounting service for e-commerce comes in. A good e-commerce accounting service will help you keep track of your finances, budget appropriately, and make sound financial decisions for your business.
The Benefits
If you’re running an e-commerce business, or are thinking about starting one, here are a few reasons why you need to consider an accounting service:
1. E-commerce businesses have unique accounting needs.
2. An accounting service can save you time and money.
3. A good accounting service will help you make sound financial decisions for your business.
4. An accounting service can take the stress out of managing your finances.
5. A good accounting service will give you peace of mind.
If you’re running an e-commerce business, or are thinking about starting one, an accounting service is a must. A good accounting service will save you time and money, help you make sound financial decisions, and take the stress out of managing your finances.
Why is bookkeeping important in e-commerce?
If finances are the pulse of your e-commerce business, inventory is the lifeblood. Simply put, no product = no revenue. You’ll know when you can afford to move and how quickly you can afford to hire based on precise bookkeeping- this way it’s easy to understand when stocking up is necessary. However, some markets are demanding so it’s important to learn the best accounting practices for online businesses before getting started in order to keep everything flowing smoothly.
When should I get an accountant for my business?
At what point should I get an accountant? Accounting should be a part of your business from the start. However, you may postpone hiring a full-time accountant until your company expands. Many small business owners or their CFOs handle accounting in the early phases of their enterprises. As businesses grow, they eventually need to outsource their accounting function. The decision on when to do so depends on various factors, including the stage of your business growth, your accounting needs, and the level of expertise you require.
Outsourcing accounting may make sense if:
Outsourcing accounting may make sense if:
Startups often have key limitations such as:
– Scarce resources
– Inexperience in specialized areas like accounting and finance
– Concentrating only on the main business goals
and so forth. These factors usually result in poor financial reporting.
Outsourcing your accounting function can provide many benefits, including improved financial reporting, access to expert-level support, and freeing up time to focus on your core business activities. If you’re a startup or small business owner, you may want to consider outsourcing your accounting needs.
What are the benefits of outsourcing accounting?
There are many benefits of outsourcing accounting, including improved financial reporting, access to expert-level support, and freeing up time to focus on your core business activities.
Some of the key benefits of outsourcing accounting include:
-Improved financial reporting: Outsourcing your accounting function can improve the quality and accuracy of your financial reports. Financial reporting is critical to running a successful business, and outsourced accounting services can provide the expert-level support you need to ensure your reports are accurate and up-to-date.
-Access to expert-level support: When you outsource your accounting function, you’ll have access to a team of experienced professionals who can provide the expert-level support you need to manage your finances effectively. This can be especially helpful if you’re not familiar with accounting or if you don’t have the internal resources to handle a complex accounting function.
How do I find a good e-commerce accountant?
The most important thing to consider when choosing an accountant is whether or not they have experience with e-commerce businesses. Be sure to ask about their experience and if they have any case studies or examples of previous clients they’ve helped. Also, ask about their fees and what services they include in their packages.
The bottom line is that e-commerce accounting is important and you should bring in accountants. It may seem like a daunting task, but with the right help, it can be a breeze. Contact us today to learn more about our accounting services for e-commerce businesses. We’re here to help you grow and succeed.
The Benefits