HOW TO TAKE TAX-FREE ?? ????FROM YOUR BUSINESS IF YOU'RE TAXED AS AN S-CORPORATION
Ronica Brown, CPA
Investor + Tax Advisor helping business owners reduce their taxes by 30% or more each year and increase cash flow | Tax Accountant & Tax Consultant
Here is one more Q2 tax tip on how you can get more money from your business completely tax free.
ITS ALL ABOUT CASH FLOW!
This one is for business use of home and car for S-Corporation filers. This is a very basic deduction, however, business owners who are taxed as S-Corporation MOST OFTEN DON’T GET THIS DEDUCTION ??????. The problem is, when you are taxed as an S-corporation you will have to reimburse yourself for this deduction.
The answer to these questions will help you to determine if you are one of those business owners who are losing out on this deduction.
1?? Do you file a Form 1120S aka S-Corporation tax return?
2?? Did you take reimbursement from your business as business use of home and car last year?
3?? Did you record in your books as an expense for business use of home and car?
If the answer to question 1?? is Yes ? and No ? to either questions 2?? or 3??, then most likely you did not take these deductions which means you overpaid on your taxes????????
How it works?
?? Let’s say your deduction for business use of home and car totaled $9,800.
??You can transfer this money to your personal account to do whatever you please and write off this amount on your business tax return. ?? The best use of the cash, I would say to spend on business items that will generate a next business deduction…so you basically get to two deductions for the price of one. Example of these expenses includes: Payments for health savings account, health insurance premiums, and other business expenses. If you are covered in all these items, then you can use it towards payment of estimated taxes.
Why it works?
??You get a deduction
????You reduce your taxes
??????You get cash to keep
This is important because 90% of tax deductions don’t return cash to you, so make good use of the few that generates tax-free cash.
Ronica Brown is a certified public accountant (CPA) and business owner who is driven by her love for entrepreneurship. Ronica's financial background and experience in business allow her to easily relate to her clients and provide them with the support they need to grow their business. She helps her clients to operate more efficiently so that they can maximize their profits, reduce tax liability, increase cash flow, and save time in their business. Visit Blog?
Attorney, Morgan & DiSalvo, PC
6 年Ronica, Interesting tax deduction info. I now understand the need to make the payment, but you did not mention the taxation of that payment on the S Corp owner’s individual income tax return. For example, if the payment is treated as income on the individual return, then the individual would need to qualify for the home office deduction, which is not always easy. Alternatively, are you saying the amount is deductible by the S Corp and not taxed at the individual level? Thx for clarifying.?