After Tax Cash is the Point of Tax Planning

The goal of tax planning is not necessarily only to reduce your taxes. The real point is to increase your after-tax cash and income. For example, I hear a lot of clients that have had accountants tell them the best way to reduce their taxes is to go out and buy a large piece of equipment. "Go spend your money," they are told, "because it will reduce your taxes". While this strategy can be good, it's only good if they need that equipment and if the timing makes it optimal to do it now versus next year, for instance. It is not usually the best strategy. They are spending a dollar to save 35 cents, and in the end they are still out the 65 cents.

I much prefer strategies that don't take any money out of pocket yet still realize the savings. Like spending a dollar to save 35 cents, and still keeping the dollar.

Here are 8 ideas to help you increase your after tax dollars

1. Brick Wall - By separating you from your business it allows you to be aggressive. When you have a track record of keeping business and personal expenses completely separate, then any borderline expenses can be used as business.
2. Good Records - Use an actual accounting software like Quickbooks, Xero, or Wave Apps. Notice I did not mention Excel. It is a spread sheet and not designed to track your expenses. Freshbooks or 17Hats and other invoicing systems that do not track all your balance sheet items are not good enough to use alone either. Way too often I see people miss expenses when using bad accounting. This is to say nothing of the time savings when you have a grasp on the accounting systems. On top of all the savings you will save dozens of hours per year on bookkeeping function that can be used to grow your business instead.
3. Track Your Mileage - Use a tool like MileIQ or other mileage tracking software. It is easy to miss mileage expenses without it.
4. Tax Structure - How your business is set up matters. There are benefits in each of the four tax structures and drawbacks with each as well. By being set up properly for your specific situation it can literally save you millions over the life of your company. Often times the best can be a combination to squeeze out the benefits of each different types for what you have going on.
5. Reimburse Your Employees - If your employees are spending money on unreimbursed business expenses, under the new TCJA rules they are no longer allowed to deduct them. As the employer you are allowed to reimburse them for those items tax free. To make this a zero additional expense for you as the employer you can agree to reduce their wages and increase their reimbursments. This keeps the employee cash the same, reduces their tax burden with both Fica, Fed and State and at the same time will reduce your share of Fica. For every dollar you save 7.65% and the employee saves 7.65% for Fica, upwards of 37% Fed and as much as 13% for the state. This is a win for everyone involved.
6. Travel - Track your days out of town and use Per Diem. If it is more than your actual expenses, you get to use the higher number and pull more tax free dollars out of your business.
7. Credit Card Rewards - Cash back on a business card is a taxable rebate of your purchases. Travel or other like kind rewards are 100% tax free and can be used for personal use.
8. Health Expenses - By using something like an HSA you are able to convert non deductible expenses into a big tax deduction.

There are many more ways we help business owners everyday increase their after tax income, too many to list all of them here. If you would like a custom plan to maximize your personal situation, you can schedule an assessment at Anderson.Tax/Tax-Savings.