Posted on 11/26/2019 by Joelle Jump
|Tax time is coming. How will it affect you? Will you go into shock when you see how much your tax bill has reduced your profits? Or will you face tax time calmly, knowing you were proactive this year and took steps to reduce your taxes?
While the norm in the tax industry is to communicate with clients after the new year, it's hardly the prudent approach. After all, what better time to do something about your 2019 tax liability than in 2019? You wouldn't take antibiotics after you've recovered from the flu, would you? No, you'd take them while you're sick in order to get better, and the same holds true for your taxes. There's no better time to start than now.
At this time of year, we can accurately estimate how your year is going to come out. With that knowledge, we can help you take steps to significantly reduce your 2019 tax bill before the year is over. There are plenty of opportunities out there when it comes to reducing your tax bill. Here are just seven.
1. Hire your family. One good option is to put your child or spouse to work in the family business. When you hire a family member, your business can take a deduction for reasonable compensation paid, which then reduces the amount of taxable business income that you receive. Just think – you could also be providing your child with some valuable work experience, so it's a win-win situation. However, there are specific rules you need to follow when hiring family members to work, so be sure to consult a tax professional.
2. Invest in Opportunity Zones. Opportunity Zones were created to revitalize economically oppressed neighborhoods using private investments rather than taxpayer dollars. To encourage private participation, taxpayers who invest in qualified Opportunity Zones are eligible to benefit from tax incentives. What a great way to reduce your tax load and give back to the community.
3. Spend money on equipment. You're likely hearing from Patterson and Schein about 0% interest promotions and big tax savings. Do these purchases make sense? Often purchasing a new piece of equipment is a good idea, as the cost can be tax-deductible. But it's not as black and white as it seems, so it's important to discuss the tax implications of any purchase with your tax professional.
4. Make contributions to a 401K. Contributions to a qualified retirement plan are deductible from your earnings this year. But there are limits to how much you can contribute.
5. Pay out year-end bonuses. According to the Washington Post, many employers are paying out bonuses rather than committing to an ongoing raise. If you're looking to reduce your tax bill, handing out some good cheer in the form of a year-end check can not only offer you a tax deduction, but provide goodwill among your staff.
6. Write off bad debts. If your business operates on the accrual accounting method, now is the time to review your patient accounts. Do you have a list of patients you believe won't pay? Separate those balances, and the amounts they owe can be written off as "bad debts," thereby reducing your taxable income.
7. Make an owner payroll change. How you pay yourself can affect how much tax you pay. A tax professional can assess your individual situation and adjust your payroll to provide you with the most tax-efficient outcome.
We've covered just a few of the ways we help our clients improve their tax situation. There are plenty more, depending on your individual situation. But the time to act is now, before the year is over. Of course, before making any decisions that can affect your business tax return, always consult a tax professional.
At Benchmarks Financial, we specialize in the dental industry and understand the specific business and tax challenges you face. After all, we're known as the fresh, affordable approach to helping dentists increase their profitability. Through our tax planning services, accounting services and one-of-a-kind financial intelligence, we have helped dentists around the country run smarter practices and take home more pay.