Xenia Accounting Firm Offers Advice To Pay Less In Taxes

Xenia Accounting Firm Offers Advice For Paying Less In Taxes

Income taxes may be the single largest expense that a small-business owner will encounter. This amount is often larger than their home or the cost of getting their kids throughcollege. It is apparent to me that one can never build any real wealth without first getting their income taxes under control.
I am often amazed at the number of business owners looking for ways to reduce
expenses. I have seen time and time again many small business owners spending hours
fighting over a $200 charge by their credit card company. Yet, they will spend little or
no time learning how to reduce their tax burden. In many cases, the amount could be
thousands of dollars. So, which amount do you feel is a better investment of your time to
save?
There was a CPA study reported in Business 2000 magazine last year that stated that
American small businesses overpaid their income taxes by over $2 billion dollars. The
overpayments were made because the businesses failed to take the tax deductions they
were legally entitled to take. Many of these businesses are still unaware of their errors.
In talking with many small business owners over the years, I don’t ever remember a
single business owner telling me that they got a call from the IRS because they missed
taking a deduction. The IRS is not going to help these businesses by telling them about a
tax deduction that they didn’t claim. That’s up to them/you!!
I was recently reading a book by Dr. Stanley titled “The Millionaire Next Door.” This guy
did extensive research on millionaires and he concluded that most people who became
millionaires didn’t win a lottery, inherit a lot of money, or make a big stock market gain.
They were, for the most part, average folks who saved a little bit each year, probably
from the taxes saved with good planning, and invested the money in an average
investment for 30 or more years.
At first I didn’t believe this so I calculated it for myself. If you were to invest $4,000 for
40 years at an average of 9% return per year, your investment would be worth a
whopping $1.6 Million at the end. This means that the small business owner who saves
money through good tax planning and invests the savings in a retirement account or
other investment can become a millionaire. Tax knowledge is lucrative.
You probably know that tax laws are constantly changing. What makes sense today may
not make sense tomorrow. If you have a CPA or accountant helping you with this role,
they better keep up with the trends! From my experience, many tax and accounting
professionals don’t proactively help their clients with tax saving strategies and prefer
taking a “back seat” approach. That does not help the small business owner.
For example, when I talk to many new business owners, they are not taking advantage of
many important tax reduction strategies like the home office deduction. Many don’t hire
their children to work in their business and hence, miss out on being able to shift
income from a higher tax bracket to a lower tax bracket. Many have not set up Roth
IRA’s for their children. Others are not sure if they are set up with the best legal
structure and overpay the government because it’s been years since their accountant last
reviewed their legal structure. Yet others operate with several owners/members and
either don’t have a buy-sell agreement in place, or have an agreement that is outdated
because it has been years since it was last reviewed.
It is important to sit down with your CPA several times through the course of the year to
review your business’s income tax trends. By meeting with a knowledgeable CPA, your
business will be able to maximize income tax deductions. Your CPA should act
proactively to consider what steps to take in the next quarter, and properly advise you to
help reduce your overall tax liability. If your CPA is not currently working with you in
this manner, it could be costing you, and your business, thousands of dollars per year.

Dayton and Xenia Accounting Firm

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