This week, we’re diving into five more game-changing tax moves that will have you looking at your business finances in a whole new light. From giving your business structure a makeover to conquering estimated tax payments, these strategies are designed to help you finish 2024 strong and set you up for success in the years to come.
Move No. 6: Give Your Business Structure a Makeover
It might be time for a corporate facelift. For instance, it may be time to switch from a sole proprietorship to an S corp. As an S corp, you can potentially reduce your self-employment tax by paying yourself a reasonable salary and taking the rest of your profits as distributions. It’s like cutting your tax bill in half – legally though.
Remember, “reasonable” is the keyword here. If you try to pay yourself $1 a year and take the rest as distributions, the IRS might raise an eyebrow. Be smart, be reasonable, and work with a professional.
Move No. 7: Be a Health Care Hero With an HRA
Implement a Health Reimbursement Arrangement (HRA). It’s like giving your employees a health care allowance, except it’s tax-free for them and tax-deductible for you.
There are different types of HRAs to choose from. There’s the Qualified Small Employer HRA (QSEHRA – gosh that’s a mouthful) for businesses with fewer than 50 full-time employees, and the Individual Coverage HRA (ICHRA) which has no size limits. Make sure you have clarity on the best option for your business by consulting with a professional.
Here’s a bonus: HRAs can help you attract and retain top talent without breaking the bank on group health insurance.
Move No. 8: Market Like Mad
While you’re spending money to make more money (also known as “marketing”), this is your reminder that you can deduct those expenses. Amp up your marketing efforts in the latter half of 2024 and watch those deductions roll in.
Redesign your website, plaster your logo on some pens, or sponsor the local Little League team if you like. Host a webinar, start a podcast, or create a viral TikTok dance challenge about your product (if that’s your thing). The sky’s the limit, and it’s all deductible as long as it’s “ordinary and necessary” for your business.
Here’s a little-known fact: you can deduct the cost of promotional items like t-shirts or mugs as long as they cost $4 or less, have your logo on them, and you distribute them widely.
Move No. 9: Invest in Your Employees’ Brain Power
Send your team to conferences, subscribe them to online learning platforms, or bring in experts for training sessions. Not only will you have a smarter workforce, but you’ll also have a fatter deduction on your tax return. Plus, your employees will love you for investing in their development.
If you provide educational assistance to your employees for courses not directly related to their current job, you can exclude up to $5,250 of this benefit from each employee’s wages annually under an educational assistance program. While you’re at it, why not learn something yourself? Any education expenses that maintain or improve skills needed in your current work are deductible, too.
Move No. 10: Master the Art of Estimated Tax Payments
Predict your income, calculate your tax, and make payments on time. In return, you can avoid paying penalties and create a sense of calm in your nervous system. You get bonus points if you set up a separate savings account for taxes and contribute to it monthly. It’s like a swear jar but for Uncle Sam.
If you expect to owe $1,000 or more in taxes when you file your return, you generally have to make estimated tax payments. In this case, you’ve got four due dates to look forward to: April 15, June 15, September 15, and January 15. Mark them on your calendar if you haven’t already.
Here’s a little-known trick: if you realize you’ve underpaid, you can increase your withholding on your W-2 (if you have one) towards the end of the year. Withholding is considered to have been paid evenly throughout the year, even if you do it all in December. It’s a little like a “get out of jail free” card, courtesy of the IRS.
Your Mission, Should You Choose to Accept It…
There you have it! Ten tax moves to make between now and New Year’s Day. Now, armed with these 10 tax-saving strategies, go make the second half of 2024 your most financially savvy yet. Your future self (and your accountant) will thank you.
AB Law, PLLC is a full-service business law and estate planning firm that serves clients throughout Texas. All consultations are free and no question is too silly, ridiculous, or complex. https://calendly.com/ablawpllc www.ab-firm.com