Tax Plan Today, Save in April
If you’re like most small business owners, you’re dealing with the “problems of today” and putting longer term strategy on the back burner. From supply chain problems to increasing labor shortages, the daily problems business owners encounter can make it hard to think six months down the road, let alone six years.
Clients who work with Coveted devote time every month to working “on their business” rather than “in it.” With our help, they are able to forecast out their finances for the next six to twelve months and make strategic moves to alter the course of their business. A common goal of Coveted clients is to reduce the amount of taxes due every year, which requires action right away.
With 4th quarter fast approaching, now is the time to really make any changes in order reduce tax implications in April of 2023. While tax planning is extremely custom to each client’s business, here are a few ideas that most business owners can implement today.
Add family members to your payroll. Depending on the set up of your business, gifting family members an interest in your business can be mutually beneficial, without giving up any controlling rights. Additionally, children can work for the family business and place earned payroll in their IRAs. These expenses will help decrease the profit of your business so that you owe less taxes on earned income.
Review your business structure. Just as you review vendors every year to ensure they are the best fit, it is important to look at the different business structures (S Corp, C Corp, LLC, etc…). “The potential for an increase in the corporate tax rate, an increase in the individual tax rate for high earners, imposition of a net investment income tax on trade or business income that could affect S Corps, LLC or partnerships, and the potential change in the preferential rate for qualified dividends all could have an impact,” states Key Private Bank.
Accelerate or defer expenses or income. As a general rule of thumb, defer income and accelerate expenses if you expect your tax rate to increase next year. Adversely, accelerate income and defer expenses if you expect tax rates to decrease.
It’s important to act fast when tax planning close to Q4, so contact us today to schedule your complimentary meeting.