If we’ve heard it once, we’ve heard it a hundred times: “I cannot believe how much money we have to pay this year for business taxes.”
That is a sad refrain but one that is all too common. Small business owners fail to save money for their previous year’s tax bill and get slammed the following April. Then, they are in debt to the IRS. Thus, begins a vicious cycle.
According to www.smallbizdaily.com:
Don’t let it happen, year after year. A smart small business tax strategy can be implemented by you and your CPA and/or financial advisor.
The biggest concern for small business owners is taxes. Almost half (45%) of small business owners in the survey say taxes are a major worry for 2018, and 30% say tax laws had a negative effect on their business last year.
Now is the time to develop a smart, small business tax bill paying strategy. Here are five ways small businesses can save money from their earnings and pay all or some of the tax bill owed from 2018:
- Take a percentage out of each check and save it: This is the simplest and easiest way to save. Call your financial advisor or accountant and find out what percentage you can expect to pay this year. Here at A.K. Burton, PC, we can give you an estimate using your tax returns and your current earnings. From that amount, you can figure a percentage you can use for deducting from each paycheck. For instance, if you paid 30% taxes last year, take $30 from each $100 that you make. Then, deposit that in a separate bank account and don’t touch it.
- Pay the IRS in installments: The Internal Revenue Service (IRS) accepts payments, year-round, of taxes owed. Your small business accountant can create estimated payment installment coupons for you to use quarterly. You send them in once you have the amount to pay. Just keep in mind, even if you have more or less than the installment amount, you can still send it in. Every payment reduces your amount due on April 15. Pay what you can. It will be a relief.
- Do an SEP (Simplified Employee Pension Plan): SEP is a tax-deferred retirement savings plan. It is specifically for self-employed and small business owners. Using a simplified employee pension plan, a small business owner makes tax-free contributions to an IRA (individual retirement account) for each employee. SEPs are funded only by the employer using tax-deductible dollars. (Roth or post-tax contributions are not available in this plan.) Employers may contribute up to 25% of each employee’s annual compensation. Self-employed persons may contribute up to 20% of their net self-employment earnings towards their own account.
- Hire a CPA, EA or a Financial Advisor: Let’s face it: running a business is a heavy-duty job and takes many hours each day. Small business accounting also takes a lot of time and effort. Save yourself some time and effort. Hire a licensed Certified Public Accountant (CPA), here at A.K. Burton, PC. Then, have us figure out a tax-strategy, implement it in your accounting program and monitor your company during the fiscal year to make sure it is working or if it needs adjustments.
January is only a few weeks away. Even with the end of the year so close, you can make all these changes before your New Year’s eve bash. Yes, it can be done that quickly.
Before you make any moves, you may want to consult the experienced and licensed financial advisors at AK Burton, PC. Our CPAs serve the Washington, D.C.metro area including our office in Bethesda, MD. We can meet with you and your staff to plan a coherent and effective tax strategy. Contact us at (301) 365-1974 for more information or email firstname.lastname@example.org.