5 Tips To Reduce Your Taxes
The topic here is taxes. The focus is to reduce them. Why? Because that’s your money and you need it now.
A quick history. We have only had income taxes officially since 1913. This was the same year the IRS and the Federal Reserve Bank came into play in a big way in our nation.
Just to give you an idea, in 1913 the top tax bracket was 7% and family’s received a standard deduction of $95,802.
Today, the top tax bracket is almost 40% and the family standard deduction is only $24,400.
What this means is that in an economic climate where money is buying less and less, we are paying more and more in taxes.
For your reading pleasure I’ve invited my good friend and CPA J.D. Frost to contribute to this article.
Now I must disclose, although J.D. is a CPA and this is about taxes this is not intended to be tax advice. It’s kind of like that one time when you were in church and you felt like the preacher was talking directly to you and you felt inclined to do everything he was teaching you about. Yea, it is like that except for you shouldn’t. J.D. is going to give some very general tax tips that can help you when implemented properly and they could also harm you if you don’t have them done correctly. At the end of this article, I highly encourage you to reach out to us and schedule a call with J.D. to review your personal tax situation.
J.D. will be taking it from here!
JD Frost:
There are many strategies that business owners can use in order to provide the flexibility and minimize their tax liability as much as possible but the following are very common structures and strategies that can be used by small business owners.
- S-Corp Management Company. It is very advantageous to set up a S-Corporation in order to provide a more set corporate structure as well as provide consistent personal income through a W2. This allows you to maintain more control over your salary each year and also allows you to eliminate your need to make estimated tax payments.
- Charitable Contributions. Charitable contributions are always a way to minimize tax liability and provide a deduction for helping your favorite charity or non profit organization. It is very important to always keep your letters that provide proof of your contribution. These contributions can be made through the business or personally.
- Safe Harbor Home Office Benefits. Many taxpayers that work from their own try to take advantage of the home office deduction but often try to take too much of a deduction. This is an audit hot topic and will immediately put up a red flag. The safest way to take the home office deduction is to use the safe harbor method which is $5 per square foot of your home office space. Simply measure the square footage and multiply it by $5 and that is your deduction.
- Tax Method Accounting. Your method of accounting for tax purposes will depend on the industry you are in and the structure of the business. This is one area where you need to hire a professional to help you but it will be completely worth it. The tax method of accounting is critically important. This can be the difference in a 37% tax rate and 10% tax rate.
- Cash vs. Accrual. (Jerry) This is actually part of the tax method of accounting that JD mentioned above. This will determine when you actually count your revenue on your books and thus how and when it will be taxed. We won’t go in depth on this one right now.
These are just a few of the strategies we use in order to help taxpayers and business owners take the best tax positions on their tax returns. It is critically important to know every angle and specialized tax code might effect your business each year. Remember your tax payments are not deductible and they are the biggest expense for every individual each year.
Incredible how much can be done with just a little knowledge of the tax code and the right CPA right? If at any point you read this and thought “Dang. I want to do this with my taxes, but I don’t know how.” Or you thought “I think I may be doing some of this wrong and I want to get it fixed so that I don’t get in trouble with Uncle Sam” then I would like to invite you to setup a free consultation with J.D. Frost and his team. They are a partner of mine, I trust them completely, and I use them for my personal and business taxes for that exact reason.
Click here to learn more and setup a call.
Own Your Potential,
Jerry Fetta
CEO & Founder of Wealth DynamX
JD Frost
CEO & Founder of JD Frost & Company
Jerry Fetta helps his clients gain more financial knowledge, make more money, keep more of it, and multiply what they keep.
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