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Tax Strategies to Consider Now

Because it's never too late to create a plan...

· Entreprenuership,Tax,Small Business

The fourth quarter is around the corner. That’s hard to believe, isn’t it? 

Around here, the fourth quarter isn’t just when I yell at the Clemson Tigers to score again, but the time of year when we work really hard with our clients to predict and reduce tax liabilities. After all, there are some things you can do in early 2017 to reduce your 2016 liabilities, but not nearly as much as you can do now.

Here are some ideas:

  • Fund a Pension Plan- Small businesses have more opportunities to shelter profit through a retirement/pension vehicle than just about anyone. So, if you don’t have a SEP or Solo 401(k) in place, or maybe a Simple IRA, you’re really leaving money on the table. Please consult your resident “Jonathan I. Godwin, CPA” for advice on what to do here. I’m serious. Do it today.
  • Double-Check Your Deductions – This goes out to my friends who don’t yet use accounting software to track revenue and expenses. Please make sure you have documented and accounted for all of the big-ticket expenses relevant to your business. For instance, for my many clients who are in the real estate industry, we stay on their backs for mileage. It’s a big deduction, especially for those real estate agents, and since the mileage rate is no joke ($.54/mile), it pays to keep track of it. Whatever your industry considers to be its biggest expense, make sure you have documentation to back up your spending and deduct what you can substantiate. It’s critical to keep track of those expenses.
  • Do a W-4 Checkup – I spend a considerable amount of time advising our Planner clients on W-4 adjustments. What do I mean by that? I am talking about those pesky exemptions you have been claiming since the first Clinton administration. If you haven’t changed yours in years, and you’re getting back $16,000 refund every year, it’s time to get that money back in your pocket during the year. Don’t loan it to the government for a year. And conversely, if you find yourself paying taxes every April, it could be that you’re not withholding enough. Changing your exemptions is as easy as a call to your HR department, or Aunt Sue, whoever handles your payroll. Let us know if you need a checkup.
  •  Consider a Different Entity for Your Business – I tell you, this is a big one. If you’re self-employed and filing Schedule C for your business, it may be time to consider changing your tax status. This year, we saved two clients over $35,000 by changing their businesses from sole proprietorships to S-Corporations. We recommend changes where we see a reason to do so, because it’s not a blanket, one-size-fits-all decision. But when it works, it REALLY works.

Of course, I didn’t include things like “go out and buy a bunch of stuff to write off.” I don’t recommend this because I think it’s dumb, unless you need that “bunch of stuff” and have been putting it off. Expensing certain assets for tax purposes is a great move to reduce your taxes, but not to the detriment of your cash position. 

So, please don’t use this as your only tax-reduction move, since it could strain your cash flow in the long run. Ask the question of your “Jonathan I. Godwin, CPA” and let him advise you.

If you’re already working with us, we’ve already had some of these conversations. I look forward to seeing you in a few weeks to do more planning. If you’re not working with us, what in the heck are you waiting for? Let’s get started!

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