Best Strategies for Your Business
Starting an S Corp comes with some exciting perks. From being able to avoid double taxation to the ability to report business income and losses on your personal tax returns, there’s a reason that you classified your business as an S Corp. But are you making the most of your business taxes?
Without the proper tax planning for your S Corp, you might miss out on potential benefits and savings when tax time comes. The tax professionals at Lacy Financial put together our favorite tax strategies specifically for your S Corp so you can maximize your tax advantages and keep more of your hard-earned money in your pocket.
Lacy Financial’s Top Tax Strategies for S Corps
1. Maximize Your Retirement Contributions
One of the most effective ways for S Corps to save on taxes is to take full advantage of retirement plans. Contributing to a SEP-IRA, SIMPLE IRA, or a Solo 401(k) can save a substantial amount on self-employment taxes and provide you and your employees with long-term financial security.
2. Implement a Reasonable Salary Strategy
As an S Corp owner, you’re required to pay yourself a reasonable salary. But what exactly constitutes a “reasonable” salary? The IRS offers no clear guidance on this, but it’s essential to strike a balance when setting your salary. By paying yourself a salary that is too low, you risk raising red flags with the IRS. On the other hand, a salary that is too high may result in increased payroll taxes.
3. Keep Accurate Records and Deduct Business Expenses
Maintaining detailed and up-to-date records of all business expenses is crucial for S Corps. This allows you to accurately calculate your tax deductions and ensure you’re not overpaying taxes. Regularly review your expenses and ensure you’re taking advantage of all available deductions, such as home office expenses, travel expenses, and other business-related costs.
4. Utilize Tax Credits and Incentives
Take advantage of the wide range of tax credits and incentives accessible to S Corps. These incentives can effectively lower your tax liability. Conduct thorough research on the various available credits, including the Research and Development Credit or the Small Employer Health Insurance Credit, and assess your business’s eligibility. By leveraging these incentives, you can considerably reduce your tax bill and retain more of your hard-earned earnings.
5. Consult with a Tax Professional
Tax laws and regulations are complex and ever-changing. As an S Corp owner, it’s always a good idea to seek advice from a skilled tax professional to help you navigate the nuances of tax planning and maximize your tax benefits.
Proper tax planning is an essential aspect of running a successful S Corporation. By implementing these strategies, you can reduce your tax liability, protect your business, and set the stage for long-term growth. At Lacy Financial, we’re committed to helping you maximize your S Corp status. Reach out to us today to discuss your tax planning needs and get the expert guidance you need to make your business as tax efficient as possible.
