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Planning your S corporation tax strategies is a necessary part of your overall business plan process. Implementing the right strategies can amount to savings and more money to spend in your business. If you avoid proper tax planning, it can cost you, and you could even end up with an audit on your hands. Here are some simple tax strategies that can yield big results.
Image Credit: (Matt Aiello)
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1. Make Your Officer Salary Reasonable
Saving money is not the sole outcome of a solid tax strategy. Legal and sound S corporation tax strategies can help you to avoid a tax audit from the Internal Revenue Service (IRS). A simple step you can take is to draw a reasonable salary from the S Corporation. Don’t rely solely on your corporation’s dividends to pay your bills. If your salary appears to be too little on your tax returns, it will become a red flag to the IRS agent reviewing your tax returns. You can use tools such as Salary.com or Payscale.com to determine a reasonable salary in your industry.
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2. Maximize Tax Deductions
Some of your business expenses are tax deductible. When looking at maximizing the tax advantages to owning a business, you should consult with your tax attorney or use tax software to help you. The IRS also offers many publications on its website that detail the various deductions available to S corporations. Some of the expenses include entertainment, travel, rental payments and other ordinary and necessary expenses that you incur during the course of your business activities. Capital expenditures and deductions are handled differently, and the IRS applies different rules to capital expenses.
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3. Negotiate a Reduced Tax Settlement
If you face a tax bill, then see what you can do to get it reduced. You may be able to persuade the IRS to settle for a lower amount, which will save you money. As long as you didn’t engage in a criminal activity, you may have an opportunity to lower your tax bills. For example, if you made a mistake in taking deductions, then you may find an agent willing to negotiate a tax settlement. The problem occurs when officers engage in suspect S corporation tax strategies to evade paying taxes. If it looks as if that was your intent, you probably won’t get far in your negotiations with the IRS.
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Don’t miss out on the opportunities to increase your tax savings with these S corporation tax strategies. It’s an effective way to survive hard economic times, and to enjoy prosperous times even more with additional money in the bank account. With so much at stake, you should consult with a tax expert to evaluate your corporation’s activities and advise you on the best tax strategies possible.
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