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:
- 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.
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.