For most small business owners, thinking about taxes occurs only twice a year … when yields are being prepared and possibly at the end of the year. With half of 2017 over, now’s a perfect time to assess where you stand and to do it which will be very helpful to your 2017 tax invoice.
1. Meet with your tax advisor vast majority of small business owners use CPAs or other tax advisers to prepare and file their returns. These tax pros may also serve as business advisors throughout the year, providing advice on what the company can to do to optimize profitability while reducing taxation. If your tax preparer doesn’t provide this service, consider finding one who will. Schedule a meeting with your advisor to review your profits or losses, and to craft a tax plan that you are able to implement going forward.
2. Assess how your profitability in 2017 is shaping up to be a good year for you, think about approaches to help with expansion when saving taxes:Buy equipment. Hire wisely. Find information concerning these targeted groups and the sum of the credit in the instructions to Form 5884, Work Opportunity Credit. Set up a qualified retirement program. You can save for your retirement years while cutting your current tax bill through contributions to a qualified retirement plan. If you do not already have a plan there are several plan choices; the one to select depends on whether you have workers and how much of the gifts the business can afford to shoulder. Find more details in IRS Publication 560, Retirement Plans for Small Business.
3. If you do R&D to come up with a solution or just find new methods for your operations by creating internal use software, you might be entitled to a tax free; this will help to underwrite the cost of research. Find Additional Information about the research credit in the directions to Form 6725, Credit for Increasing Research Activities.A “qualified small business” can opt to use the credit as an offset to the employer’s share of Social Security taxes (up to $250,000) rather than using it against income taxes. Which company is qualified? One with less than $5 million in gross premiums for the current year and no gross premiums for any year prior to the fifth year prior to the present calendar year. For example, a business with $4 million in gross receipts in 2017 and no gross receipts prior to 2012 may use this option. Locate a broader explanation of this option from the IRS.
4. Issue stock; if you’re a C Corporation in manufacturing, technology, retail, or wholesale, you may be eligible to issue stock (known as small business inventory or Section 1202 stock) that will allow the shareholder to eventually acquire tax-free treatment for any capital gain. More specifically, if you issue the stock now and it’s held for more than five years, then all of the gain is tax free. The stock has to be acquired in exchange for cash, property, or services (i.e., not received as a gift or inheritance). Thus, it may be utilized to: Bring in new investors as well as reward employees. Find more details about a qualified small business for this purpose from the directions to Schedule D of Form 1040.
5. Review your income tax payments. If you’re paying your income taxes on company profits through estimated taxes, you have two more times to get it appropriate for 2017: September 15, 2017, and January 16, 2018. You don’t want to overpay, which is an interest-free loan to the government (recouped when you file for a refund), or underpay, which can result in costly tax penalties. Keep in Mind that estimated taxes comprise Not Just regular income taxes (including the alternative minimum tax), but also:Self-employment tax0.9\% additional Medicare tax on earned income3.8\% additional Medicare tax on net investment income. Find more information about estimated taxes in IRS Publication 505, Tax Withholding and Estimated Tax.ConclusionThe summer has begun. Do not miss this chance to assess your tax position and also to determine the strategies you’ll be able to use between now and the end of the year to optimize your tax bill for 2017.
Contact Robert Ritch, firstname.lastname@example.org with any questions or if you need assistance from Rob’s team of professionals.