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Small Business Tax Saving Strategies for the 2013 Filing Season.

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Presentation on theme: "Small Business Tax Saving Strategies for the 2013 Filing Season."— Presentation transcript:

1 Small Business Tax Saving Strategies for the 2013 Filing Season

2 The Simple Stuff Understand Tax timing Get the big picture at totaltaxinsights.org Pay your estimated tax payments Have solid books Dont be cheap: Capitalize on the value of tax planning often 3 to1 return If you cant pay still file Pick up all of your expenses -Meals and entertainment -Learning and education/Professional dues -Mileage -IT and Communications 2

3 Contribute to Retirement 401(k) IRA -Payroll Deduction IRA -SEP -Simple IRA -Profit Sharing ** Refer to IRS Comparison Worksheet 3

4 Planning for Retirement Variety of options, designed to fit your needs -401(k) allows flexibility; salary deferrals and/or employer contributions -SIMPLE IRA and SIMPLE 401(k) are available only to small businesses; for SIMPLE 401(k), employer is required to contribute -SEP is simple, inexpensive 4

5 Expenses: Section 179 Deduction Expensing provision for certain business property Maximum $500,000 first-year Most tangible personal property eligible -Computer, office furniture, vehicles and machinery, software Phaseout begins at $2 million Limits and exceptions Does not have to be cash can be credit/loan 5

6 Expenses: Bonus Depreciation If 179 is not enough…. First-year bonus depreciation allowance for eligible property 50% deduction for property placed in service in 2013 Property eligibility requirements Benefits of using bonus depreciation: -Immediate tax relief -Improved cash flow -Additional reinvestment capital 6

7 Expenses: Start-up and Organizational Costs Start-up Costs -Deduction in year business starts/succeeding years -Can include full range of business investigatory costs -First $5,000 in expenses deducted; the remaining is amortized over 180 months -The deduction requires an election 7 Organizational Costs -Deduction for certain costs in creating C or S corporation or partnership -$5,000 maximum -Same rules as business start-up costs -Certain legal and accounting fees

8 Small Business Health Insurance Credit 35% of premiums paid Must cover > 50% of health care Pay at least ½ of employees health insurance 10 or fewer FTE – Avg Wages < $25,000 Or 25 or fewer FTE – Avg Wages < $50,000 Carryback/forward 8

9 Choose the right entity at the right time Sole Proprietorship Partnership Corporation S-Corporation LLC Sole Proprietorship – most affordable, least fees, no protections, limited tax planning. Partnerships – unplanned complexity, simple as a handshake, always limited protections for someone. Corporations – double taxation S-Corporation – most opportunity for tax planning LLC – Simple to set-up, provides protection 9

10 Home Office Deduction Simplified $5 per square foot up to 300 square feet Interest and property taxes in addition 10

11 State taxes Debt forgiveness not extended California state income tax rate increased California Enterprise Zone going away December 31,

12 Up to $37,440 per eligible employee over a 5-year period Employees can be full-time, part-time, or seasonal Employees must work in the Enterprise Zone at least 50% of the time Our sister company assists with claiming this tax credit 6/9/2014 Caliber 12 Tax Credit Example: Hiring Credit

13 Important Tax Rule: Corporation Built-in Gains No net built-in gains tax on certain property If sold more than 5 years after conversion from C corporation to S corporation Special rule for 2011 – normally 10 years Reduced taxes and additional investment capital 13

14 Planning for Net Operating Losses NOL deduction available when current years income is less than current years deductions NOLs can be carried back 2 years and forward 20 Planning required to maximize deduction NOL versus Section 179 deduction NOL versus bonus depreciation Many businesses have large NOLs generated during economic downturn. Proper planning will insure best tax result so that NOL benefits are not allowed to expire. 14

15 Planning for Business Succession Critical to start now – need to have plan for unexpected events Significant impact if a principal owner/ partner suddenly leaves or dies Several strategies available to finance a smooth transition Sources of financing can include: -Life insurance -Buy-sell agreement -Grantor trust Best plan should fit structure of company, personal preferences & needs 15

16 Key Takeaways CPA-small business owner partnership CPA advice Year-round tax planning 16

17 17 We are a full service CPA firm. Let us know how we can help. (559)


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