Tips to Help You Navigate Tax Season

Tips to Help You Navigate Tax Season

Update: 2022-04-15
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Gene (00:02 ):





Hey everybody and welcome to this week’s edition of The Hartford, Small Biz Ahead podcast. My name is Gene Marks and I’m glad you’re joining me this week, because we’re gonna talk about a very important issue: taxes. Now, wait, don’t turn this podcast off. You gotta listen because I don’t know about you, but I just paid in my tax bill for 2021. It was a lot and you shouldn’t complain if you’re earning money, you pay your taxes. But when I add up my taxes between city and state and federal, it’s pretty close to 40% of my income, which is an enormous number. And I need to be doing more to proactively minimize my taxes and that’s gonna be a commitment for me and my business this year. And you should be doing the same thing. It’s a big number. Even if it’s 20%, 25%, it’s probably one of the largest expenses that you pay all year – is your taxes.





Gene (00:53 ):





Now April 18th is the due date for individuals and corporations filing their taxes. Most small businesses that file like, S corporations or partnerships, pass-throughs, they were due back on March 15th. So, okay listen, for the most part, 2021 is behind us. Let’s focus on 2022. Let’s talk about now, what we can be doing to save taxes in 2022. So the first item of business is very simple and straightforward. Meet with your accountants. Now you’re probably listening to this and it’s mid-April. So you want to be meeting with your accountants sometime next month in May. By then their busy season should be over. And because if you meet with them in May, the year is almost half over. There’s still plenty of time to plan your tax moves.





Gene (01:42 ):





And by sharing with your accountant how your business has been doing this year and your projections for the rest of the year, better tax estimates can be made, right? Which can help to avoid surprises. So meet with your accountant as soon as possible, probably twice a year. Now and maybe in the fall as well. Next I mentioned tax estimates – pay them. Whatever your accountants said you should be paying for quarterly tax estimates in 2022, make sure you do, because if you don’t, you’re gonna really fall behind and you could be subject to penalties and interest. More importantly though, if you meet with your accountant throughout the year, depending on how your year is going, you may wanna adjust those tax estimates. Maybe you pay a little bit more or a little bit less, depending on how your year is going.





Gene (02:24 ):





So meet with your accountant, pay your tax estimates. Those are two of the most simple, straightforward things you should be doing this year to make sure you’re minimizing your taxes. Let’s move on to the next big item. And that big item is the Work Opportunity Tax Credit. This credit can provide an enormous tax savings for your company this year and through 2025. The credit, which can be as much as $9,600 and offsets the amount of taxes that you owe. It may be available to you, if you hire someone out of prison, off of welfare, leaving the military or who has been unemployed for more than six months. So talk to your accountant before you hire that person to see if the new employee is eligible and how much of a credit can be earned. And you know what, perhaps you might want to consider sharing some of that tax savings with the employee in the form of a hiring bonus to entice them to join your company.





Gene (03:15 ):





Next this year, invest in more capital equipment. Most small businesses can deduct up to a million $80,000 when you’re investing in capital equipment, which includes machinery, furniture and most technology products purchased. So investing in capital equipment is a great way to hedge against inflation because capital items and other things like assets, like property, but more importantly, machinery and equipment even technology tends to, it tends to keep up with inflation. What’s even more attractive is that you could finance this equipment, right? So while interest rates are still low. buy the equipment, get it financed. As long as you put it into service, by the end of the year, the full deduction you can realize this year. So that’s very important to do – investing capital equipment. Next, let’s talk about retirement, put as much money as you can into your pre-tax retirement accounts.





Gene (04:11 ):





If you don’t have a 401k plan in your company, get one set up. The 2019 Secure Act provides tax credits for companies with less than a hundred employees to do so. If you have a 401k plan, try to save the maximum amount. Most tax payers this year can save up to $20,500 individually. And up to $61,000, if a company matches. Most importantly, encourage your employees to participate because the more they save, the more you’ll be able to save without failing the government’s year-end discrimination testing. If you don’t have a 401k plan, setup a simplified employee pension plan and possibly put additional amounts away into an IRA, talk to a financial advisor, put as much as you can into retirement and defer your taxes by doing just that. Speaking of these kinds of tax savings accounts. If you save money in a Roth IRA or a 529 plan, your income has already been taxed, but future earnings and gains from these investments, won’t be. A Roth IRA is limited to certain income levels, but if you’re eligible after tax amounts can be saved and all future withdrawals are tax free.





Gene (05:20 ):





A 529 plan will enable you to save money for yourself and other family members that will grow tax free as well. As long as it’s used for higher education or private or religious school on withdrawal. Let’s talk about your employees: You wanna save money on taxes. You can also use the government to help you leverage some of your employee benefits. So like for example, through 2025, you’re allowed to deduct up to $5,250 per employee, when you help pay for their student loans. You may also be able to deduct up to $5,250. If you reimburse them for other education expenses, there are generous tax credits for employers who build childcare facilities and separately, an employer can exclude from an employee’s income up to a limit, certain qualified childcare expenses and save themselves employer taxes. The IRS also allows you to deduct up to $14,890 this year to help employees with adoption expenses.





Gene (06:16 ):





All of these amounts would not be taxable to your employees. So these are great deductions that the government is providing for you, that won’t be taxable to your employees again. Why give the money to the government, give it to your employees instead. Health insurance is my final item. If you have a high deductible health insurance plan, please make sure to set up health savings accounts, HSAs for yourself and your employees so that all could save pretext money and then use those funds for non-reimbursed medical expenses like acupuncture, vision and infertility treatments. Health savings accounts (HSAs) are like a 401k for your healthcare. People can put a certain amount of money away. There is a limitation, but if they don’t use it, it will roll over to the next year. And then if an employee leaves your company, the money leaves with them as well. So people love that stuff.





Gene (07:02 ):





It’s a great benefit to offer and will save both them and you money on your health insurance. Finally, if you’re eligible, consider setting up health reimbursement accounts to put pre-tax money away for employees to buy health insurance on their own. So listen guys, no one likes to pay taxes. I get that, but with a few proactive steps, your com

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Tips to Help You Navigate Tax Season

Tips to Help You Navigate Tax Season

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