Scott Tominaga Shares Strategies for Business Owners to Lessen Their Tax Liability

Tax planning is integral for smooth business functioning, as properly managing tax burden can go a long way toward making a business profitable. There are various measures that business operators can use to minimize their tax burden legally in the opinion of Scott Tominaga. By adopting effective tax strategies, they can stay compliant with the tax laws and maximize their financial returns. Below are some of the key strategies that business managers can undertake to minimize their tax burden. 

1. Make Use of Tax Deductions

One of the best ways to reduce taxable income is through using tax deductions accessible to business entrepreneurs. Typical deductions that are allowed include business-related expenses like office supplies, insurance, utilities, marketing expenses, etc. Owners should make sure that they are accounting for all legitimate business expenses while claiming tax deductions.  

2. Select the Appropriate Business Structure

The form of business structure that a firm embraces can make a huge difference in terms of its tax burden. For example, sole proprietorship and partnerships usually report business income on the individual tax returns of the owners, which can result in increased self-employment taxes. Alternatively, forming an S Corporation or Limited Liability Company (LLC) can provide substantial tax benefits. 

3. Maximize Retirement Contributions

Entrepreneurs can lower their tax bill by making contributions to retirement accounts, like 401(k) or SEP IRA. Contributions to such plans get tax exemption and putting money in retirement accounts allows entrepreneurs to become wealthier over time. The contribution ceilings for retirement plans tend to be greater than with regular IRAs, enabling entrepreneurs to save more while lowering their present tax burden. 

4. Use Tax Credits

Tax credits help by lowering the amount of taxes payable, making them a useful tool for business owners. The federal government and most states allow several credits for business owners, including the Research and Development (R&D) tax credit, which is offered to businesses that invest in new products or services. Further, companies can also frequently get credited for hiring staff from specific target groups, including veterans or the long-term unemployed, or for integrating energy-efficient practices in their business operations. 

5. Business Losses

If any business faces losses, they can apply for offsetting the loss with other income. Known as NOL deduction, businesspersons are allowed to carry forward such losses into subsequent years to lessen future taxable income. According to Scott Tominaga, this can be especially useful for start-up businesses or businesses with temporary downturns.

6. Restore Detailed Records

Accurate record-keeping is essential to maximize deductions and minimize tax burden. Business owners must keep detailed records of every income, expenditure, and investment. Utilizing accounting software or opting for the services of a professional accountant to monitor financial activity ensures that all qualifying deductions and credits are taken into account, minimizing the potential for errors when filing taxes. 

Tax planning for business owners has the potential to greatly affect a company’s bottom line. Make sure to adopt the above strategies by seeking the assistance of a tax consultant to personalize the strategies as per the specific needs of a business while conforming to fast-changing tax regulations.