Tax Strategies for Small Businesses

1
Tax Strategies for Small Businesses

• National Business Accounting Consultants
• NBAC
• Washington DC Baltimore Gaithersburg MD
• 877-772-NBAC (6222)

2
Accounting side of a business cycle
Becoming a partner
Selling a business
3
Choosing the right entity type

• Sole Proprietorship (self-employment tax)
• Partnership (pass-through entity)
• LLC
• C Corporation (double taxation)
• S Corporation (pass-through entity)

4
Tax considerations for evaluating choice of
entity (Sole Proprietor -LLC-Corp-S Corp)

• Formation consequences
• Tax rates
• Income distributions
• Payroll tax implications
• Problems with losses
• Fiscal year
• Fringe benefits
• Transferability

5
Understand business expenses

• Understand deductible expense, most expenses
  fully deductible, some half deductible (meal and
  entertainment), some non-deductible (federal tax
  payment, penalty)
• Some easily overlooked business expenses
  business gifts, dues and subscriptions, catering,
  casual labor and tips, travel, parking and
  meters, credit card interest, etc.

6
Minimizing taxes through charitable giving

• Ordinary income property
• Food donations
• Book donations
• Other inventory donations
• Scientific and/or computer equipment
• Assembled by the taxpayer

7
Strategy during the year

• Keep records of business expenses
• Track depreciation of tangible property and
  amortization of non-tangible property
• Consider home office
• Transportation
• Pay yourself through employee benefit program
• Control your payroll expenses

8
Keep records of business expenses

• Always collect receipts of business-related
  activities.
• Always keep company bank statements, check
  copies, and credit card statements.
• Do bookkeeping and reconciliation timely

9
Depreciation of tangible property and
amortization of non-tangible property

• Depreciation of equipment, vehicle, computer,
  etc.
• Amortization of business start-up costs,
  goodwill, etc.
• Elect Section 179 deduction expense, instead of
  depreciate, tangible property up to 125K

10
Home Office

• Deduct home office expenses if using part
  of home for your business, including part of
  mortgage, real estate tax, utilities, insurance,
  security, HOA, home depreciation, home
  improvements and repairs.

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Transportation expenses

• Deduct auto expense standard mileage
  deduction or actual expense deduction (insurance,
  loan interest, repairs, maintenance, gas, other)
• mileage expenses deduction
• 07 48.5 cents/mile
• 08 50.5 cents/mile
• Employers may provide workers with
• up to 115 per month in tax-free
• transit and vanpool benefits 220
• in qualified parking in 2008

12
Employee Benefits

• Variety of retirement programs with different
  limits, eligibility requirements and levels of
  exclusivity
• Insurance programs including health, life,
  disability and long-term care with a range of tax
  benefits
• Section 125
• Targeted executive
• programs

13
Payroll taxes

• If employees, employer pays employment taxes,
  including SS tax, Medicare tax, FUTA and SUTA tax
• If contractors, contractors pay self-employment
  taxes
• Accurately determine employee or contractor based
  on IRS rule

14
Pay yourself first

• Between Social Security/Medicare, Federal and
  State income taxes, retirement plan contributions
  save up to 50 in taxes
• Utilizing self-employed spouse strategy
• Unique benefits of Section 125 plans
• Hire your children

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Lease-back strategies

• Fully depreciated property may be sold to the
  business owner and leased back to the business
• The seller attains a lump sum of cash quickly and
  the buyer acquires a lower than market value
  purchase price, along with a long-term lease at a
  premium rate.
• Buyer derives tax benefits from the arrangement,
  such as being credited for depreciation of the
  property

16
Get professional help from experts

• A chain is no stronger than its weakest link
• Natalie Berman, CPA
• Jie Chen, CPA
• Boris Foxman, RFC (employee benefits
• financial
  planning)

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Footnote

• Looking for accounting and financial planning
  professionals with or without established
  practices within all ethnic groups