Cutting Taxes for Small Business

Respect the IRS.

By all means, take every legal deduction you can. Realize that there are many business deductions that are subject to professional judgement and are dependent on business type and circumstances.

Tip # 1 Do you know your tax bracket? Consider deferring income from 2015 to 2016 to prevent a higher tax bracket. This can be done by proactively spending via cash payments, credit cards or loans for the cash basis. For the accrual basis, revenue recognition principles should be explored carefully as well as the timing of accruing expesnes. Consult with your CPA.

Corporate Income Tax Rates--2005-2016

Taxable income over Not over Tax rate $ 0 $ 50,000 15% 50,000 75,000 25% 75,000 100,000 34% 100,000 335,000 39% 335,000 10,000,000 34% 10,000,000 15,000,000 35% 15,000,000 18,333,333 38% 18,333,333 .......... 35%

Tax Rate--Single Taxpayers--2016

Taxable income: Tax: Over But not over Tax +% On amount over $ 0 $ 9,275 $ 0.00 10 $ 0 9,275 37,650 927.50 15 9,275 37,650 91,150 5,183.75 25 37,650 91,150 190,150 18,558.75 28 91,150 190,150 413,350 46,278.75 33 190,150 413,350 415,050 119,934.75 35 413,350 415,050 ....... 120,529.75 39.6 415,050

Tax Rates--Married Individuals Filing Joint and Surviving Spouses--2016

Taxable income: Tax: Over But not over Tax +% On amount over $ 0 $ 18,550 $ 0.00 10 $ 0 18,550 75,300 1,855.00 15 18,550 75,300 151,900 10,367.50 25 75,300 151,900 231,450 29,517.50 28 151,900 231,450 413,350 51,791.50 33 231,450 413,350 466,950 111,818.50 35 413,350 466,950 ....... 130,578.50 39.6 466,950

Tip # 2 Get the most out of your auto/gas deduction Compare the standard mileage method of (57.5 cents per business mile for 2015) and actual method (Gas, repairs, registration, lease payments, interest, car washes, etc. times % of business use) to see what benefits you the most. Tip # 3 Instead of raises, give your empolyees de mimimus perks. Wages are expensive as they are accompanied with employer taxes of social security, medicare as well as worker's comp insurance which collectively can add about 25% to the cost of wages. Perks can include reimbursements for uniforms, cell phone usage, $75 gift cards for a merit award, gym memberships, etc. There is alot of legitimate creativity here. Consult with your CPA. Tip # 4 Running a home office? Use the simplified deduction method: method this year,$5 per square feet of area (300 s.f. Max) used exclusively for business otherwise, determine your home office % and take the actual expenses. It's extremely important to know what expenses are eligible and you wouldn't believe what's includible such as fertilizer for your lawn and flowers for your planters.

• Also check out the Fit Small Business guide to the Home Office Tax Deduction.

Tip # 5 Running a startup? The government encourages starting a new business by allowing a $5,000 write-off for startup expenses. These are expenses incurred after business activity commences but are otherwised amortized over 5 years. Tip # 6 Maintain your books and records or hire someone to do it. It is imperative to have a decent set of books so you can make informed and accurate decisions expecially at year-end. If you're audited with poor records, you will be fighting an uphill battle and definitely lose credibility. When that happens, the auditors are less likely to allow questionable expenses compared to when everything is in order.

As you can see, there are plenty of options for the small business owner, and unique ones at that. Make sure you consult with your adviser and don’t be satisfied with the standard answer. A small business owner’s tax return offers a lot of potential to keep the tax man at bay and a great CPA is your best ally to make it happen.