Small and medium enterprises are the backbone of any economy.
In these uncertain times when revenue is already very low, small businesses that rely on the community around them are on the brink of closing down. The government’s stimulus was supposed to help with higher consumer expenditure, but that didn’t happen either, which meant businesses had nowhere to save themselves. Struggling business owners had to pay high taxes, which further crippled the spirit of entrepreneurship and dreamers in the country.
If you’re a small business owner, you can use your business’s income in other ways to shield it from heavy taxation. Here are three strategies you can use to protect your business income from taxes.
Employ Family Members:
The IRS has special supervision for small businesses, especially if they employ family members in them. For example, you can get a tax cut on your business if you employ your spouse in the same business; this way, the income stays within your household, while the taxes are also reduced. Similarly, small businesses can even reduce their marginal rate or even go as far as the elimination of tax on income that is paid to their children. This way a smart entrepreneur can shield their business income from heavy taxes.
Retirement plans are a great strategy that has long-term value and short-term benefits for both, the business and its owners. The government doesn’t tax income that is spent on retirement plans, which means you can get premium plans according to your income, and invest in your future, rather than having to give that away in the form of federal and state taxes.
Just like retirement plans, healthcare expenses in the form of Health Safety Accounts or HSA are also not taxable. This way, you can set up high-deductible accounts and benefit from them in the long-run as healthcare expenses continue to rise. This looks like a sound strategy, especially in the midst of a pandemic that has claimed many lives.
These strategies are not as simple as they sound and need some expert advice as tax laws differ in each state. This is why having an experienced and trustable expert tax advisor is absolutely necessary, and if you’re looking for one, we’d suggest you consider 3Alpha LLC.
With our trained and experienced team of accountants and expert tax advisors, we can help you with timely tax preparations. With our legal tax advice for business, you can save and reinvest to make your business more successful. Contact us to learn more about our services.