Collaborate on Tax Invoice Example for Planning with Ease Using airSlate SignNow

Tax invoice example for Planning

what is tax planning and how can you create one what's up everyone is sherman the cpa and today you are going to learn exactly what tax planning is and where to start to create your own tax planning can help you reduce your tax bill by hundreds thousands tens of thousands and even hundreds of thousands of dollars depending on your unique set of circumstances i have seen people use tax planning to reduce their tax liabilities by 10 50 and even 100 which basically means they reduce their tax bill to zero by simply creating a plan to accomplish this so today you are going to learn how tax plans make all of this possible and some specific areas you can focus on to reduce your own tax bill so that sounds good to you go ahead and click the like button below as we get started here [Music] all right so what is a tax plan a tax plan is the analysis and arrangement of your financial situation to pay the lowest amount of taxes possible keywords here are analysis and arrangement you have to first analyze your current tax situation like the amount of income you report and the type of taxes you pay for example and then you have to arrange your financial situation in ance with the tax law to reduce the amount of taxes that you will pay so basically if you want to change your tax you must change your facts the taxes you owe are due to the facts and numbers that you report on your tax return so the goal of tax planning is to create a plan to change those facts so you can pay less tax but you cannot begin to change those facts if you do not understand the most recent facts you reported on your last tax return so let's go ahead and help you understand the top three things you need to know about your most recent tax return alright so number one the amount of income you reported you can find this information on line 40 of your 1040 on your tax return your income is the best starting point for your tax plan because it determines the amount of taxes that you will pay so if you show a lower income on your tax return you will pay less taxes and there are several legal ways to reduce your taxable income such as using tax deductions tax credits tax deferrals and other types of strategies now typically these strategies work best when you are dealing with business and investment income which the tax law tends to favor overall for example when you own property you can take advantage of depreciation to create tax losses on your tax return alright number two the types of taxes you paid and there are three main types of taxes that you need to be aware of here in general number one federal income taxes which you pay to the irs number two state income taxes which you normally pay to your state's department of revenue and number three self-employment tax which you pay to the irs if you are self-employed now it is important to understand the types of taxes you pay because each tax you pay has different tax rules for example there may be state tax deductions and credits that you can use to lower your tax bill but those same strategies may not apply to federal income taxes and vice versa likewise there are tax strategies that may reduce your self-employment tax but have zero impact on your federal and state income taxes so take note of the types of taxes you pay and find every way to reduce those types of taxes number three the amount of taxes you paid now this is simple but extremely important you will need to identify how much you're paying in taxes now and use that as a benchmark to beat in your tax planning then as you start looking at various tax strategies to reduce the amount of taxes you're paying now you can identify how much money you're actually saving by implementing those strategies this will also help you identify which tax strategies are even worth pursuing and which ones are not because you certainly don't want to spend one dollar chasing 15 cents if the tax strategy costs you more money more time and more energy than what you're receiving in return from implementing that strategy then it may not be worth the pursuit so that's step one analyze your tax return find out how much income you're reporting now the types of taxes you're paying and how much of those taxes you're actually paying then you can move on to step two which involves changing your facts to change your tax now there are probably 100 different ways you can change your facts to reduce your tax but i want to give you the top three areas i tend to focus on to generate the most results for my clients which are predominantly business owners and active investors by the way if you want a complete guide to reduce your taxes then sign up for my tax savers course at mycpacoach.com all right area number one this is the first question you need to ask yourself which entity will reduce my taxes the most each business entity has different tax rules which means there has to be one of these entities that will save you the most in taxes as a business owner some entities treat self-employment tax differently like s corporations and others treat income tax differently like c corporations now generally the s corp tax status is most favored for business owners who are earning over fifty thousand dollars per year in business income and this is because s corps do not have to pay the 15.3 percent self-employment tax however depending on your circumstances being taxed as a c corporation or llc may still be more beneficial for example if you reinvest a significant amount of profits back into your business each year a c corporation may be more favorable or if you are in the early stages of your business and you're not earning a whole lot of business income then you may find it easier to just operate as a sole proprietor general partnership or llc there are no cookie cutter ways to apply these strategies so you really have to understand your tax facts to create specific plans to arrange them to become favorable for you all right question number two you need to ask yourself which business tax deductions am i not taking tax deductions are your best friend because they lower the amount of income you report therefore the more tax deductions you take the less taxes you pay and for business owners tax deductions are the single most powerful tool you can use to reduce your tax liability the tax law allows entrepreneurs to deduct a lot of things that most people just can't like business vehicles home offices business meals business travel business equipment and technology health insurance and so much more so always remember this section 162 of the tax law allows you to deduct all ordinary and necessary expenses incurred for your trade or business this means that almost any expense can be deductible if it meets these requirements all right question number three what tax deferral accounts should i be taking advantage of to lower my taxes now every dollar you deposit in a tax deferred account is a dollar subtracted from your taxable income up to certain limits of course but the idea is that you can simply transfer money from one account to another account to lower your taxes now these tax deferred accounts have different limits and rules regarding how you can access that money once you deposit it so you need to plan around that but otherwise they can be powerful instruments inside of your tax plan so here are the most popular tax deferral accounts out there number one the solo 401k which provides up to around 60 000 as a deduction and number two the sep ira which is an alternative for the solo 401k but also can provide up to a 60 000 deduction number three the traditional ira which anyone can use which provides a six to twelve thousand dollar deduction and number four the hsa or health savings account which also can add another 3 600 to seventy two hundred dollars as a tax deduction if you decide to use it as you can see you can add thousands of dollars to these accounts to save thousands of dollars in taxes plus you can invest the money into these accounts to build even greater long-term wealth now i train on each one of these strategies in my tax savers course at mycpacoach.com so if you want to learn how to use these strategies click the link in my bio for a special discount to get started while we still have seats available as always thank you for watching and i look forward to seeing you in the next episode talk to you soon [Music] you