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Some tax strategies for small businesses filing taxes in 2020

Part three in this series, I break down some of the tax planning strategies that are available to you depend on so many factors. The few strategies I will cover in this post today include:

  • Retirement
  • Investments
  • Healthcare
  • Family (Children’s Education)

Retirement or should we call it something else?

Retirement is a tricky conversation for most leaders of small businesses. Myself included, sometimes I neglect to invest some time away from the month to do some proper planning. This information will not be all inclusive as there are hundreds of personal finance and or wealth management firms who can give you a more detailed approach. However the following investment tools work just fine for the time being. The three products I will recommend include  the small business 401k, IRA, and Roth IRA.

 

When I speak about investments, I am specifically talking stocks, mutual funds and some insurance products. Therefore, moving forward if you see a broad term titled “investments” you know what the term is referencing.

Retirement products for startup founders and small business owners alike

401k’s for small business owners, Individual Retirement Arrangements (IRA’s) and Roth IRA’s are a great choice for those who want to personally invest in their retirement and offer it to employees.

Retirement products for startup founders and small business owners alike

Investing is important for your overall retirement strategy.

The great benefit of investing in yourself in terms of taxes is that it reduces your taxable income. The amount it reduces varies by year and when you work with Magnitax.com or your tax professional they can properly plan a strategy that is suitable to your situation.

Investments can be for your retirement or a rainy day

The stock market is very tricky for many would be investors. Some may think it is analogous to the State lottery but that is far from the truth. During this post I will not go into the origins or the pros and cons but I will say look into finding an investment company that suits your needs. For simplicity sake, take $1,000 and invest it for one quarter and you’ll get a good idea of how it can affect your short-term and long term needs. Many online investing companies provide content and courses on trading strategies, which will move you further down the path of competency.

How should a CEO treat healthcare with the new tax cuts and job act

Luckily for all of us who have either cashed out our 401k to become entrepreneurs or who just didn’t think about paying for healthcare can avoid the penalty! Yes, now that $695 penalty will be avoided unless something changes from the time this post is published. However, if you are lucky to not only start a business but also put money away; a Health Savings Account is a good starting point. You can use this to pay for expenses such as fillings and more and it is perfect for those who do not have a large employee plan. Great news, the limits for Health Savings Account contributions have increased; see chart below.

View more data on the IRS Website

Your family and investing in their future education

Face it, you would not want your children or grandchildren to bear the weight of a college or postgraduate studies alone. Therefore, there are many ways to save for their post-secondary education expenses without putting a burden on them. For instance one type of investment product is a 529 college savings plan. The plans vary state to state but a good place to start in terms of how they benefit you and your tax situation would be on the IRS website.

The series continues next with, What has the tax cuts and Jobs Act done for small business owners filing taxes in 2020? Be sure to continue reading so that you are all caught up this tax season.

The Tax Cuts and Jobs Act

The tax cuts and jobs act which was put into effect in 2017 and ushered in some amendments to a bunch of laws. What American taxpayers need to look out for when filing taxes in 2020 is a series to give you insight on the tax filing season.Follow the 3-Part blog series: What American taxpayers need to look out for when filing taxes in 2020? Written by Jean-Désir Fils Click To Tweet My job with this three-part series is to make sure American taxpayers are prepared for the tax season. As I will always mention, this is not tax-advice and if you want to get in touch with a tax advisor; Shngli and FreeTaxPrepUSA has a directory full of them. 

Tax Planning for your tax situation

Even if you’ve already filed your taxes, listen up. You probably feel like you’ve missed the ability to do some tax planning. I will break down in the retirement section, some present and future option. Tax planning can be a bit overwhelming but simple strategies are in front of you. Besides, most of the time an advisor need not apply. Executive and the challenges during tax season. Executives for their respective companies need to pay attention to this series as well. As many of you have read some of the tax deductions are changing; such as now you can only deduct 50% of those dinners to entertain new clientele. No worries you will have some new opportunities to put money back into your businesses bottom line.

Small Business owners should pay attention to their tax advisors advice more

I’m a Miami based founder and resident, our city ranked 24th in terms of entrepreneurial growth activity according to a 2017 Kaufman Study.

Small-Business-owners-should-pay-attention-to-their-tax-advisors-advice-more

(Photo by Tom Szczerbowski/Getty Images)

When it comes to economic incentives and more, small business owners should pay attention to their tax advisors advice more often. Furthermore, advisors should sit down with clients more often to not only gauge present but future needs as well. Many states and municipalities provide tax incentives to business owners that could change and the city’s economic and social climate.

Retirement planning for you and your family

Retirement is multi-faceted because we now have so many different generations of retirees. Phased Retirement is here, according to The New Rules of Retirements by Robert C. Carlson, a managing member of Carlson Wealth Advisors, L.L.C., he coined the phrase, phased retirement. Phased retirement is where a person in his or her sixties leaves an employer after working for 10 plus years.Phased retirement is where a person in his or her sixties leaves an employer after working for 10 plus years. Click To Tweet This person takes about six months to a year of relaxing or taking on new extracurricular activities before figuring out how they will live the remainder of their lives.

Real Estate for 2020 and beyond

Whether you are in the real estate market as a buyer or investor, 2020 is a year to focus on many facets of the industry. Again, because the Federal Reserve is lowering rates to your local market, let’s break it down. First, here are a few things to keep in mind because of increased interest rates in terms of real estate:

  • Fewer houses on the market
  • Difficulty in financing for less qualified buyers
  • More, just pick up a simple economics book for a refresher

Data in the real estate industry

“There is relatively little rigorous, economics-based focus on commercial real estate development: the actual process of capital formation, where and how financial capital is converted into the physical capital that greatly impacts cities, society, the environment, and the economy.

“A very exciting frontier is to link the economic and financial perspective of real estate development to the physical perspective of the architects and urban designers. We could use the development of both theory and empirics.”  David Geltner Professor at MIT

Read more

Making sense of tax definitions

New tax payers ask, what are the basic tax definitions when filing your tax return in 2020? Since it depends on where they start doing them, this could get a bit tricky so I will keep it brief. In this 2nd part of the series, you will become familiar with simple tax preparation vocabulary.

Deductions for individuals put you in a lower tax bracket

Deductions for individuals lowers the amount of income you may owe on your taxes. 

Popular deductions for itemizing your tax return

What we recommend is to visit the IRS website and go through their deductions list. Additionally, if you have questions, do not hesitate to reach out to your tax professional or someone on our team.

Here are a few deductions:

  • Standard Deductions (2019 Tax Year)
    • Single deduction:
      • Under 65: $12,200
      • Over 65: $13,850
    • Head of Household:
      • Under 65: $18,350
      • Over 65: $20,000
    • Married Filing Jointly:
      • Under 65: $24,400
      • Over 65: $25,700 (one spouse)
      • Over 65: $27,000 (both spouses)
    • Married, Filing Separately deduction:
      • Any age: $5
    •  Qualifying Widow(er):
      • Under 65: $24,400
      • Over 65: $25,700
    • Please go to the standard deduction interview on the IRS website if you have any concerns.
  • Medical Deductions:
    • If you paid your expenses above and beyond what your insurance covered; you can itemize these medical expenses in your Schedule A.
  • Home Mortgage Interest and Points

Tax Credits for individuals

When you find out your taxable amount that you owe, there are credits that you may receive.

  • Nonrefundable tax credits give taxpayers refunds only based on the amount owed to the IRS on a tax return.
  • Conversely, Refundable Tax Credits give taxpayers refunds no matter the amount you owe the IRS on a tax return.

Furthermore, there are a few tax credits you should consider this year or next tax season.

  • Pay Student Loan Interest
    • If you have student loans, get a credit for paying some of it down each tax year.
  • Elderly Tax Credit
    • 65 years old
    • Credit range: $3750 – $7,000 As of 03/14/2020
Read more

What are the tax documents to be filled for my new LLC?

Surprisingly, no matter where you are in the United States; there are IRS documents that are universal to you running a successful company. The first being your Taxpayer Identification Number/Employer Identification Number (EIN). You will also choose to fill out either the IRS  form 8832 Entity Classification Number, and form 2553 Election by a Small Business Corporation. In part two of the series, I will go into detail for each IRS document. That is to say, if you aren’t comfortable with any part of this process; reach out to an advisor of your choice.

Getting your taxpayer identification number

Have you ever been to the County Fair, Disney or a private Party? The county, fair, Disney World or a private party would request a ticket or you would be kicked out. Certainly, with running a business you will need a taxpayer identification number to be in compliance with the Federal Government and participate in business activities. Consequently, after picking your LLC name and type in the previous step, you’ll need your Employee Identification Number (EIN) to eventually open a bank account and more. To illustrate, get your EIN on the IRS website without paying any attorney or private company fees; click here.

After picking your LLC name and type in the previous step, you’ll need your Employee Identification Number (EIN) to eventually open a bank account and more. Click To Tweet

The IRS Form 8832 Entity Classification Election

For instance, whether you are building an e-commerce store or a beauty salon; getting the right tax status will set you up right for the future. If you are building your company as a sole proprietor; you can skip to IRS Form 2553 section. In conclusion, if you have several investors and want the corporation to be taxed separately then you would specify that on the form.

The IRS Form 2553 Election by a Small Business Corporation

This election is great for a corporation that wants its shareholders to be taxed for income made versus the corporation itself. Furthermore, this election can be tricky because the IRS determines how long you have to file. To sum it up, the S-corp status is to say, file this only after you’ve made the decision it is best for your corporation.

Forming your new LLC without expensive attorney fees series

The series created by Jean-Désir Fils is structured as seven separate blog posts. Each post will break down the steps needed to form your LLC without an expensive attorney fee. To clarify, any questions for your specific state will be added with links to your respective state in the future. Thus, the series will include a downloadable checklist that will ensure you remain on track to succeed no matter your level of business know how. Check out the remaining five posts in the series here:

Second Part

What tax-related tasks do I need to complete with the IRS for my new LLC?

Third Part

What organizational tasks do you complete for your new LLC?

Fourth Part

What are some tips to make a "Doing Business As" (DBA) for my new LLC?

Fifth Part

What are some of the licenses needed for my new LLC?

Sixth Part

What are some of the smartest ways to fund my new LLC?

Seventh Part

What to look for when hiring the best advisor team for your new LLC?