Understand taxable versus untaxable fringe benefits

Fringe benefits such as a company car, subsidized meals, and insurance can be a great way to pay for services and decorate a more enticing employee package. However, these fringe benefits are taxable most of the time — unless they are specifically excludable by law. Knowing which fringe benefits linger outside the taxable realm can ease the tax burden every year. When your business understands which benefits pack this double punch, you can save money on payroll taxes. The tax rules for each are a little different, so it’s important to choose the right fringe benefit investment for your individual company.

Invest in counsel to benefit your business

Tax planning shouldn’t be an end-of-year scramble. Instead, it should involve a consistent, yearlong conversation with your tax attorney or accountant. It’s better for your business’s continual health — and your sanity — to work with a professional who can provide meaningful counsel on a variety of choices you make throughout the year that can drastically change your tax situation. When you establish a relationship with a tax advocate, you’re less likely to face audits and more likely to save significantly as your business grows.

Invest in retirement now

If you own a small business, you can create retirement plans that take advantage of tax deferral rules to maximize tax savings now and retirement savings later. Instead of trying to tackle the ins and outs of setting up a retirement plan yourself, consult a professional. There are so many different options — 401(K), SEP IRA and SIMPLE plans — that it’s worth having a seasoned expert to help you navigate the system and choose an ideal option that will serve both your business and personal financial health now and in the future.

Find the silver lining in a loss

Most small businesses end up with net operating losses (NOL) during the first few years of operation. A net operating loss means tax deductions are greater than the taxable income, which usually happens when business expenses have exceeded earnings. Though this seems like bad news, NOLs can be used to recover past tax payments and reduce future tax payments. NOLs can create tax relief by applying loss to past payments and receiving a creditor by applying the net loss to future income taxes. The rules vary based on your business, so knowing how to work them can have a huge impact.

Make balancing your taxes a priority

Traditional tax planning involves trying to accelerate deductions and credits while deferring income. Many taxpayers are cash-basis taxpayers, which means that they get to deduct expenses when the expense is paid, and they have to declare income when payment is received. Therefore, expediting expense payments while deferring income payments can improve the current year’s tax position.

Tax Saving Strategies for Export Business Owners

In summary, to implement this strategy you will need:

⇒ Be an exporter.

⇒ Have a parent company.

⇒ Open a DISC or domestic international sales company that is exclusive for exporting activities.

⇒ Open a Roth IRA.

⇒ Open a Roth IRA LLC.

DISC type companies don’t pay taxes on profits for commission received from parent company for exporting but DISC dividends are taxable if distributed to a shareholder.

The implementation goes like this:

⇒ Fund the Roth IRAs.

⇒ Buy a % of the DISC stock with the Roth IRA funds.

⇒ Transfer the DISC shares to the Roth IRA LLC.

⇒ Parent company pays commissions to DISC for exporting.

⇒ DISC distributes dividends to Roth IRA LLC.

⇒ Roth IRA LLC pays taxes on dividends received. 

⇒ The balance left in Roth IRA is tax-free as it’s in a Roth IRA.

This particular strategy that two brothers used is tested in the courts. It seems that a solid understanding of the internal revenue code and a correct application of the tax rules does bear its fruits.