Taxes are obligations to the government for the services rendered to the public, which benefit the business directly or directly. In this guide, we will discuss different tax planning tips for salaried employees and small businesses.
Tax Strategies for Salaried Employees:
- Take advantage of pre-tax treatments. Pre-tax allows you to make most of the whole dollar before taxes are computed. Instead of deducting tax on your gross pay, you can take advantage of pre-tax to consider “gross pay” after certain expenses are deducted. Companies offer different forms of pre-tax treatments, but the most common ones include commuter or parking fee benefits, group life insurance, group long-term disability insurance, and charitable contribution.
- Deduct job-related expenses. These expenses must be included on the 2% of your adjusted gross income. Educational and professional training expenses related to work, expenses of job-related travel, job hunting expenses, and other unreimbursed work expenses are some of the job-related expenses that can be deducted from your income to avoid taxing them.
- Join the 401K. Retirement may be too far away, but someday you will. It is best time to start contributing now. It will not just build your retirement nest, but it will save you from taxes.
- Get 529 Savings Plans. If you have dependents, it is recommended to get them 529 accounts. It can give your dependents a great chance to study college. Plus, it will save you from unnecesary taxes. Instead of saving the money for the educational purposes and pay taxes at the same time, 520 accounts protect the educational purpose without the taxes.
Tax Plans for Small Businesses:
- Seek help. Taxes are matters of the business. There are penalties and interests to deal with when you failed to properly handle taxes. If you can do your research, it is great. However, if you can't do the research yourself, seek a consultant to do the job. Paying off the consultant may be a burden, but paying penalties, fines, and interest may eat your profits.
- Get deductions. If individuals can get deductions, of course, small businesses can get them too. You check the following deductions and take advantage of them. These include automobile deduction, entertainment expenses deductions, home office deductions, and travel expenses deductions.
- Classify the business right. Don't you know that there are different tiers of business taxing? Yes, you can classify your business as Sole Proprietorship, Limited Liability Corporation, Partnership, C-Corporation, and S-Corporation. C-Corporation has bigger liabilities and higher tax rates than Sole Proprietorship type of businesses.
- Do it monthly. Instead of paying taxes one time every year or quarter, you can ask the IRS for a monthly payment. By paying the tax in increments, you will be able to avoid downsizing the operating capabilities of the business.
