Corporate Tax Planning
Corporate Tax Planning is complex and risky with economic uncertainty, done correctly can relieve onerous burdens that stymie development.
Tax planning is the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency. Through tax planning, all elements of the financial plan work together in the most tax-efficient manner possible. Tax planning is an essential part of an individual investor’s financial plan. The reduction of tax liability and maximizing the ability to contribute to retirement plans are crucial for success.
How Corporate Tax Planning Works
Tax planning covers several considerations. Considerations include the timing of income, size, and timing of purchases, and planning for other expenditures. Also, the selection of investments and types of retirement plans must complement the tax filing status and deductions to create the best possible outcome.
CORPORATE TAX PLANNING KEY TAKEAWAYS
- Tax planning is the analysis of finances from a tax perspective, to ensure maximum tax efficiency.
- Considerations of tax planning include the timing of income, size, the timing of purchases, and planning for expenditures.
- Tax planning strategies can include saving for retirement in an IRA or engaging in tax gain-loss harvesting.
Tax Planning for Retirement Plans
Corporate Tax Planning using savings via a retirement plan is a popular way to efficiently reduce taxes. Contributing money to a traditional IRA can minimize gross income up to $6,500. As of 2018, if meeting all qualifications, a filer under age 50 receives a reduction of $6,000 and a reduction of $7,000 if age 50 or older. For example, if a 52-year-old male with an annual income of $50,000 who made a $6,500 contribution to a traditional IRA has an adjusted gross income of $43,500, the $6,500 contribution would grow tax-deferred until retirement.
There are several other retirement plans that an individual may use to help reduce tax liability. 401(k) plans are popular with Corporate Tax Planning at larger companies that have many employees. Participants in the plan can defer income from their paycheck directly into the company’s 401(k) plan. The greatest difference is that the contribution limit dollar amount is much higher than that of an IRA.
Using the same example as above, the 52-year-old could contribute up to $24,500. As of 2018, if under age 50, the salary contribution can be up to $18,500, or up to $24,500 if age 50 or older. This 401(k) deposit reduces adjusted gross income from $50,000 to $25,500.
Tax Gain-Loss Harvesting
Accountants use Tax gain-loss harvesting is another form of Corporate Tax Planning or management relating to investments. It is helpful because it can use a portfolio’s losses to offset overall capital gains. According to the IRS, short and long-term capital losses must first be used to offset capital gains of the same type. In other words, long-term losses offset long-term gains before offsetting short-term gains. As of 2018, short-term capital gains, or earnings from assets owned for less than one year, are taxed at ordinary income rates.
Corporate Tax Planning with Long-term capital gains is taxed based on the tax bracket in which the taxpayer falls.
0% tax for taxpayers in the lowest marginal tax brackets of 10% and 15%
15% tax for those in the 25%, 28%, 33%, and 35% tax brackets
20% tax of those in the highest tax bracket of 39%
For example, if an investor in a 25% tax bracket had $10,000 in long-term capital gains, there would be a tax liability of $1,500. If the same investor sold underperforming investments carrying $10,000 in long-term capital losses, the losses would offset the gains, resulting in a tax liability of 0. If the same losing investment were brought back, then a minimum of 30 days would have to pass to avoid incurring a wash sale.
Up to $3,000 in capital losses may be used to offset ordinary income per tax year. For example, if the 52-year-old investor had $3,000 in net capital losses for the year, the $50,000 income will be adjusted to $47,000. Remaining capital losses can be carried over with no expiration to offset future capital gains.
If this is your situation Corporate Tax Planning is imperative
- You need help analyzing the impact of developments in EU and US tax policy on your business.
- You want to exercise greater control over your company’s subsidiary tax compliance affairs.
- You must eliminate long-standing uncertainties about your company’s tax position and accounting procedures.
- You would like reliable advice on EU tax opportunities and risk management.
- You need guidance on how to deal with EU and US tax law issues and how to document the procedures for reporting purposes.
- You want to know how to safeguard your company’s EC Treaty rights.
- You need help to perform due diligence on both your EU and US tax positions.
- You require assistance with your legal actions against the tax authorities.
- You must organize tailor-made EU and US tax strategy workshops for your company.
Protect Your Retirement With the Right Strategy
Want a better way to maximize your retirement income? A comprehensive corporate tax planning financial strategy can help you make smart investment decisions. To develop a strategy that’s right for you, call Accountants in Miami.