Why use tax strategies?
Building a business from the ground is not easy. You must employ every strategy at your disposal for the best outcome. Likewise, creating wealth from your meager salary will not be easy; you will also need to hire several tax and investment strategies. But in this article, I will be focusing on tax strategies that small businesses may use to build six to seven-figure businesses. As for individual taxpayers, watch out for my next article discussing tax strategies for individuals to build generational wealth.
Tax strategies exist so that you use them to build generational wealth. The only question you should be asking now is – how do I implement them? Below I give you strategies that every small business can successfully implement.
Understand your business profile.
Before lifting a finger regarding tax strategies, you need to ask yourself: What is my tax situation like? Every business has its own tax situation. Some do pay almost half of their income to the IRS. Some pay even more than that, while others are somewhat in between. Some also do not know whether they have expenses that qualify for deductions or not. Without a proper appraisal of where you stand, it will be challenging to implement tax strategies. Therefore, regarding this, I suggest you call my office, book an appointment, and talk to me. We will need to first understand your situation before recommending the best tax strategies for your business.
When strategizing your taxes, you are basically trying to reduce your taxable income, increase your number of tax deductions throughout the year, and take advantage of certain tax credits. To implement all this, you simply need to understand your business tax situation.
Be confident; nothing is beyond your control
Indeed, building your personal confidence is on my own list of strategies to beat taxes. Why say this? Most business owners think that taxes are beyond their control. But that is not true. You have the power to influence what happens with your taxes. You do have the ability to make yourself pay zero taxes. If you do not believe this, you are bound to do nothing that helps your business. You will only go with the crowds, albeit with a heart beating fast each time you hear the word, ‘IRS’. There is no need to be scared. Start acting now and take control. Build confidence, talk to me, a tax pro, to map the best way for your business taxes.
Map your deductions
This is an important step where you ‘audit’ your business for current and potential deductions. With the help of a tax pro, identify deductions you are already taking. Regarding them, you do not need to do anything but simply maintain them. Next, you must look at all your other expenses. The tax pro will help you quickly identify other expenses that can be deducted.
Again, if you talk to me today, I will help you turn your expenses into actual deductions. For this to succeed, you must also read the next point on audit proofing these deductions.
You can also diversify into real estate to earn more deductions. Remember, portfolio income and income earned from real estate rentals have a lower tax rate. So why not invest there and pay fewer taxes? In the end, you save tens of thousands of dollars every year.
Audit proof your write-offs
This is a crucial step when building your tax strategies. What is audit proofing? This is merely steps you take to validate or substantiate all your tax credits, deduction, and write-offs. For example, you must have travel logs and receipts for trip-related costs such as gas if you deduct travel expenses. This step ensures that you get no surprises from the IRS in case they refuse your deductions.
Keep an ear out for changes in tax law
This will protect you from IRS penalties. It also helps you benefit from every new favorable tax laws. For example, when the Tax Cuts and Jobs Act (TCJA) was implemented in its first year, many small businesses did not benefit. They knew nothing about it until someone whispered it in their ears. However, the best way to benefit from new tax rules is to hire a tax expert for all your tax planning and filing. If you need one, contact us today.
The bottom line: How to invest tax savings to build generational wealth
The end goal when implementing all tax strategies is to build generational wealth. Therefore, by now, you should know that you do not only aim to save money on taxes. But you also want to know how to use the saved money to expand your net worth. The more your net worth grows, the more you build generational wealth.
Small businesses definitely need growth. Therefore, you can use some of the saved money to expand your business. You can also use it to invest in other profit-making small businesses for a stake. Again, being a silent investor in those companies, you will pay less taxes from the proceeds earned. Some businesses do save the money saved on taxes until it is enough to diversify into real estate. You can also do the same. Real estate is one of the major components of a portfolio belonging to someone building generational wealth. There is more you can do; talk to us today for more information.
Frequently asked questions
- What are the 3 basic tax planning strategies?
Basic tax planning strategies revolve around reducing your overall taxable income, increasing your number of tax deductions throughout the year, and taking advantage of certain tax credits.
- How can I reduce my income tax?
To reduce your income tax, increase your number of deductions throughout the year and ensure that you benefit from all tax credits you qualify for. You can also take your income and turn it into portfolio income.
- How do I prepare a tax plan?
To prepare a tax plan, first, understand the type of income you earn. Also, make a list of deductions you may qualify for, including tax credits. But for the best tax plan, you need to talk to a tax pro for help.
- What is a tax planning strategy?
A tax planning strategy analyzes all your finances to ensure that everything works together – like a machine – to reduce your overall tax bill.