Legal Loopholes: 5 Tax Tips for Small Businesses
Being in business was always your dream. Now you are doing it and it's hard. Are there things you can do to hang on to some of that money you labored to earn when tax season comes?
Yes, there are. Let's take a look at five legal loopholes suggested by Incredibly, a small business capital management site. These tips will help you make the most of the money you do make, and give you an idea of options to talk about with a lawyer.
5 Legal Loopholes
- S Corporation Status: The advantage of this type of incorporation is that it allows you to pay out a portion of profits in the form of dividends. Money paid out to employees in dividends is not taxed at the same rate as payroll, so you can save money every year by structuring your corporation and payments this way. That said, this is only really useful for companies that are already profitable.
- Scrutinizing State Laws: Your business is where it is and so are your workers, and sure you would do deals with anyone. But be very careful when entering into new contracts or purchasing property or even hiring employees in certain places when you expand. Analyzing tax laws in your own state, those nearby, and where you wish to expand may help you to find loopholes or added savings specific to your needs.
- Medical Deductions Add Up: A medical reimbursement plan in which your business reimburses all medical expenses may provide you with savings in an unexpected place. Without the reimbursement plan, you and employees likely must cover certain medical expenses and also cannot deduct them from taxes. With the business reimbursement plan, you can legally and legitimately deduct all non-deductible medical expenses as business expenses.
- Hiring Your Kids: Not every business can do this and not every kid will be cooperative, but there can be tax advantages to splitting income within a family, according to Incredible, and you may end paying a lower rate than you would have otherwise.
- Deductions for Travel: Be careful about business deductions and make sure to follow the rules. But you can still work within the law and get the occasional awesome deduction, like a flight to your next vacation. Coordinate your business and leisure travel and, if you do business in a place and have proof of it, you can deduct some of your travel expenses.
If you are concerned about taxes for any reason -- whether you worry you have not taken advantage of all available loopholes, or you have not paid taxes at all, or just want general guidance -- speak to a lawyer. A tax attorney can help you with filings and ensure yours are correct, as well as informing you of changes you can make to save even more on taxes.
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