It’s April! By now you’re either done with your taxes or WISH you were done! That makes it a great time to plan what you might do differently so that next year is even easier to get your taxes completed on time with less stress. And you might also be able to pay less in taxes.
- Take a moment to think: Would it make sense to take the S-Corp election if you are an LLC? The paperwork to make the conversion is not very complex. The S-election can save you on your payroll taxes. Since there are certain time windows where the IRS allows you to make the conversion, schedule a time with your accountant (after tax season is over) to discuss whether it makes sense for your business.
- If you are an S-Corp, you get to set your payroll amount. After last year’s taxes are filed is a great time to make changes for this year. Should you give yourself a raise? Should you change the way you fund your retirement and adjust your quarterly tax contributions accordingly?
- Should you put your kids on the payroll? If there are legitimate jobs they can do and may be able to save that money towards college, you could help them save and lower your taxes at the same time.
- What’s your company retirement plan? A Solo 401(k) works great if you are a sole proprietor with no full-time employees. It let’s you put the most dollars away for retirement with complicated ERISA testing. A SIMPLE plan works well if you have some employees. You’d get to put away $15,000 (if you’re over 50) plus 3% of your salary. You’d contribute a matching 3% for any participating employees.
- Rethink your mileage tracking tools. Is it time to purchase a company vehicle? I personally still use mileage tracking spreadsheets, but there are some pretty slick iPhone and Android apps that my newly minted business owner friends recommend.
- Redouble you efforts to also fund your Roth if you qualify. You can have a Roth contribution as well as an employer plan, such as SIMPLE or 401(k), as long as your Married filing joint income is below $186,000. That number has been raised from 2016. The biggest trick, of course is to make sure you have the cash to put into your retirement plans. That’s another good reason to start planning now so you can put aside what you need on a monthly basis instead of trying to find it all next April.
- Go EVEN MORE paperless. With my ScanSpap scanner, I can scan documents then throw them away. I use DropBox so I can see what I need from my Desktop, Laptop, iPad and iPhone. And everything is backed up to the cloud so there’s no need to keep paper ‘just in case’. Also if you’re like me who had major smart device breakage this year, it’s easy to recover. We recently added an app called Scanbot, which we use to snap receipts since my husband is often the person who buys the Home Office Maintenance items as well as the computer infrastructure equipment we buy around the house/office. I am the person who gets to make sure the accountant has what’s needed to do the taxes.
I’ve covered just a few of the great small business tax planning relief we’ve implemented in our business(es) over the last couple years. Our inspiration and redoubling of our planning efforts usually happen around April when we are dreaming of how to make next year’s taxes easier to file even as our business empires grow!