This year has been an incredible challenge for many businesses, as owners and employees alike adapt to quick, constant and sweeping change. While we all continue to settle into our new normal, the time has come for business owners to apply that same fresh eye and willingness to adapt to their financial plan.
Why now? The end of the year is nearing, and the time to pivot is running out.
“If you’ve been approaching your finances with the same mindset as years past, you may be missing out on some important opportunities,” explained John Vance, President and Visionary of Vance Wealth in Santa Clarita. “Lots of people are still unaware of the new tools and solutions that are available to us right now – and these options could make a significant impact in the lives of business owners, their families and their employees.”
From payroll to taxes, both large and small business owners can take steps to save more before 2021. Though it may seem daunting after such a tumultuous year, all it takes is a few creative strategies and a thoughtful financial plan to see a significant difference. In fact, it’s very common for the advisers at Vance Wealth to find between $5,000 and $15,000 in tax savings immediately.
“The problem is a lot of businesses don’t know where to start. Yet, that’s also why we’re an excellent fit – because we can get that conversation going,” John said. “Part of our value is in providing the clarity you need to take proactive and forward-thinking steps toward the future of your business.”
But it’s time to act now. To take your business’s financial plan into the future, here are five opportunities to help you save more money.
- Payroll Structure
Many business owners don’t realize that how they decide to pay themselves impacts their payroll tax and personal income taxes. The amount you pay yourself, as well as the pay structure you use, directly affects your payroll taxes, and with a few simple changes, we can shift it from a negative impact to a positive one. For example, if your kids have part-time jobs at your company, putting them on payroll can now help you save in payroll taxes. Simple changes like this one add up to significant savings.
- QBI Deduction
The Qualified Business Income (QBI) deduction was introduced as part of the Tax Cuts and Jobs Act of 2017 but still isn’t being utilized as widely as it could be. Sole proprietorships, partnerships, limited liability companies (LLC) or S corporations could qualify for a tax deduction worth up to 20 percent of their net income. There are some restrictions, but this easy deduction is not one to be missed and payroll decisions can negatively impact this.
- Retirement Plan Contributions
Most business owners aren’t aware of all the options available when it comes to retirement plans and contributions. Generally, people stick to the common SEP-IRA or 401k options, but they could be missing out on the valuable benefits of a less common choice, such as a Roth 401Ks or profit sharing plans. While it may seem complicated to the business owner, all it takes is the right adviser to save more without any additional stress.
- Tax Planning
Most business owners are hard-wired to focus on lowering their tax bill for the current year – but that’s not how you save the maximum amount of money. Proper tax planning can help you rethink your approach to tax savings, by creating a long-term plan to lower the cost over your lifetime. Sometimes, it’s just a matter of asking the right question: How do I create more tax savings over the life of my business, not just this year?
- Charitable Giving Deductions
The tax code for charitable giving deductions changed significantly with the Tax Cuts and Jobs Act of 2017, and if you haven’t adjusted your strategy since then, you’re missing out on valuable savings. Similar to the change in mindset required for proper tax planning, charitable giving deductions require a little forward thinking. By planning for a lifetime of giving, you save more and give more. Now that’s what we call a win-win.
We’ve helped dozens of clients review their business’ financial plan and save thousands in taxes, retirement and more. If you haven’t reviewed your plan in the last year, we would love to help you see the difference thoughtful planning can make – now and for years to come.
To book a complimentary consultation with one of our Wealth Advisors, please call our office at 661-775-0950 to set up an appointment.
Vance Wealth, Inc. (“Vance Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Vance Wealth and its representatives are properly licensed or exempt from licensure.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.