Are you currently a W2 wage earner or 1099/Sole Proprietor?
W2 wages are the highest taxed. The taxes come right off the top and you only have about 3-4 deductions such as a 401k or IRA, Mortgage Interest Deduction, HSA’s. etc.
Sole Proprietors only have about 15-30 different deductions that you can claim on a Schedule C, and you are also subject to Self-Employment taxes.
Are you aware that there is a whole other tax code out there that consists of 81,000 pages! You need to live your life like a business. What do I mean by that. If you live your life inside of a Corporation or LLC or even multiple different companies, you are allowed to take advantage of far more write-offs. The tax code provides Corporations and LLC’s up to 233- 305 different write-offs. This allows you more use of your money upfront which ultimately reduces your overall taxable liability. So what things are deductible? The IRS says what is necessary and reasonable.
Below are 43 examples, however as I said, there are far more.
Accounting Fees, Advertising, Air Conditioning, Airplanes, Assistants, Business Promotion, Bad Debts, Boats, Bonuses, Bookkeeping, Alarm Systems, Business Awards, Business Consultants, Disability Plans, Decorating, Business Meals, Legal Fees, General Business Insurance, Vehicles, Corporate Setup Fees, School, Health Clubs, Home Office, Leasing an Office, Research, Medical Bills, Interest Payments, Business Travel, Equipment, Seminars, Technology, Insurance, Braces, Education, Property, Loans, Massage, Gardening, Logo’s, Web Design, Legal and Professional Services, Team Building, & Paying your kids*
Through 6 Different deductions, I can show you how to save almost $100k in taxes in your business.
1. Safety and Longevity awards: = $1,600 each award Let me explain these awards. If you are the person in charge of keeping the workplace safe, you could be the one who takes advantage of the Safety Award. If you are the person
who has been in the business the longest, you could be awarded the Longevity Award. NOW understand this, the Longevity Award cannot be taken year after year by the same person. If the same person were to receive this award again, they would have to wait a period of 5 years. Same goes for the Safety Award. It cannot be taken year after year by the same person. This award cannot be cash or cash equivalent meaning a VISA or Mastercard, gift card and CANNOT BE TRAVEL. However, if there is something else you would enjoy, like a new set of Callaway Golf Clubs or that new Orbea Bicycle you’ve had your eyes on. The company would cut a check to the merchant for the item. It can then claim it as a deduction and is not considered taxable income to you.
2. Medical Reimbursement Plan: = Up to $10,000 per person on the plan A Medical Reimbursement Plan is a Self-Administered plan that is established by the company. The company may contribute up to $10,000 to plan which is a Tax deduction to the business and is not considered income to you. If you are self-insured, the plan can be used to cover things that aren’t covered by your health insurance such as Premiums, Co- Pays, Deductibles, prescriptions, etc.
3. Vehicle Deduction = $7,500 per year on average Now, I am not talking about taking advantage of the vehicle deduction on your Schedule C. I am saying that your Corporation or LLC can lease your vehicle from you and pay you based upon mileage driven, just like any other employer would do. This means that if you drive 1000 miles per month as an example, and the reimbursement rate for that year was 62.5 cents per mile, the company should be writing you a reimbursement check for a total of $625 for the use of the vehicle that month. This is a tax deduction to the business, however it will be considered income to you. Due to the depreciation of the value the personal vehicle due to business use, this could wipe out that income on your personal taxes. This money can be used to cover things like vehicle payments, insurance, maintenance, fuel, etc.
4. Retirement Plans (SoloK) = up to $62,000 per person (Husband and Wife) I am not a Qualified plan expert by any means, so this information is for informational purposes only. A SoloK plan is a lot like a 401k plan that you would have with an employer. You would establish a SoloK plan for you and your spouse through a Self- Directed Administrator (There are many out there). Based upon your Salary with the company, you could contribute up to $62,000 to the plan which becomes a tax deduction to the business and puts money in a qualified plan for you and your wife. Now the beautiful thing about these plans is that you can borrow against them unlike an IRA. So, if you need a boost in your business, the company could borrow against it. This type of plan also allows you to invest in alternative investments that grow tax deferred. This is not considered investment or Tax advice so if you want to learn more about these types of plans, talk to one of the many Administrators out there. IF you want a referral, we work with several different companies that provide these services.
5. Education for the growth of your business = $5,250 avg. (Changes from time to time) Do you like to attend events to learn new strategies for the growth and development of your business? The IRS code allows you to deduct up to $5,250 per year for tuition to these conferences. You must have a written Educational Assistance Program in place and there are certain requirements. The plan cannot favor highly paid employees. It can’t provide more than 5% of the benefits to shareholders or owners. Employees can’t receive cash or other benefits instead of educational assistance and you must give reasonable notice of the program to employees. If you are the only employee, this makes it easy. Now let’s define employee. In order to take advantage of this benefit, you will need to be drawing a small salary from the company.
6. Hiring your Children = $12,200 per year * The IRS says that we can employ our children starting at the age of 3-18. The duties have to be age commensurate, and the services do have to be performed. What you would need to do is keep a time sheet of the work they did and for how long. This allows you to pay them up to $1,000 per month which is $1,000 less per month that you personally need to draw out of the company. This money can be used for educational expenses, Dance, Band, Sports, etc. Now of this $12,200 over the year, you can also contribute up to $6,000 per year to a ROTH IRA that you establish for your child. Now imagine if you have multiple children how this can be beneficial to you, your family and a tax deduction to your business. * There is a caveat to paying your kids. If your paying them out of your Corporation or LLC that is taxed as a "C" Elected or "S" Elected company, you will need to withhold taxes like any other employee. However, if you setup a Family Management LLC that is owned by you, or by you and your spouse, you can pay the kids out of this company without any withholdings. That's right, completely tax free income to your kids and is a tax deduction to your business.
With these 6 different deductions, I just showed you how to save $98,550.00 per year in your business and as I mentioned above, you have access to 233-305 different corporate write-offs!!
You might be saying to yourself, my CPA handles that. Are you sure? Have you had your tax returns reviewed by another professional. Our experience is that most CPA’s overlook around $6k - $9k in deductions per year. You see most CPA’s are not tax strategists! I make jokes about this all the time. There are two types of CPA’s. 1. CPA stands for Certified Public Accountant which means they are proactive and might offer you ideas to consider where number 2. CPA stands for Cut Paste and Attach. Meaning, its just rinse and repeat. You might hear them say things like “This is what I have done for my clients in the past." This means they are creatures of history. You need someone who is going to offer guidance and strategy, that will enable you to take advantage of all these awesome benefits I have mentioned above. By living Corporate Life, it allows you to keep more of your hard-earned money and pay a lot less in taxes.
To learn more about how Living Corporate Life may benefit you, call our office at 775-384-8124 or send an email to contact@controllersltd.com . You can also book an Appt with my Sr. Strategist at www.calendly.com/stephan-controllers