by Dave Horwedel, CEO of Torchlight Tax.
Want to increase your profits and lower your taxes using your S Corporation? You are watching the right video!
Most business owners think accounting is something you do at the end of the year for taxes. That’s a mistake.
This is doing taxes after the fact. The tax year is past. You cannot change the past. Yes, a skilled tax professional can still find ways to save you money, but this is limited. However, if you keep your bookkeeping and accounting updated throughout the year, you can take action during the year to increase your income, lower your taxes, and create future income. This allows you to be CAUSE over your income and taxes.
Accounting, when done correctly, is how you control your business in real time.
If you already understand what a profit and loss statement is and what a balance sheet is, the next step is using those numbers to make decisions now, not later. (See my videos WHAT IS A PROFIT AND LOSS and WHAT IS A BALANCE SHEET on the Torchlight Tax YouTube channel.)
When your accounting is current—weekly or at least monthly—you can see exactly what’s happening in your business as it happens. You can identify what’s working and immediately put more resources into it. You can also spot problems early and correct them before they grow.
Now, many small business owners are overloaded. They are working like mad to close that next sale or complete that next job. They lack time for bookkeeping and statistical analysis.
But, how do you increase your profit if you do not know what it is?
We at Torchlight Tax can handle your bookkeeping and accounting so you know your gross income and profit on whatever schedule works for you. We can also track other substatistics and break down your income by service and product. That’s how profits increase—not by guessing, but by measuring and adjusting in real time.
Now, a sharp business owner may have an intuitive feel for his business. He knows he just sold a big contract that will take weeks to deliver. However, a more extensive analysis may benefit him. Moreover, if the business owner tries to do the accounting himself, this has serious pitfalls. First, not knowing accounting, he may make mistakes and spend too much time on it.
If the owner is good at selling and delivering goods, he should be selling and delivering!
An S Corporation gives you additional advantages when you combine it with proper accounting.
One of the biggest benefits is control over self-employment tax. By paying yourself a reasonable salary and taking the rest as distributions, you can reduce the portion of your income subject to self-employment tax.
You can also use strategies like the Augusta Rule, where your business rents your home for meetings and takes a deduction, while you receive that income tax-free. See my video: SAVE THOUSANDS OF TAX DOLLARS RENTING YOUR HOME TO YOUR BUSINESS.
The home office deduction, when done correctly through an accountable plan, allows your S Corporation to reimburse you for expenses and take a deduction without creating taxable income to you.
Vehicle deductions can also be structured properly to reduce taxable income, whether through mileage or actual expenses.
And when your accounting is up to date, you can make strategic decisions before the year ends.
If you see your profits increasing, you don’t wait until tax season. You can increase marketing, invest in equipment using Section 179, or spend in ways before year ending that both grow your business and reduce your current tax liability.
At the same time, you’re building future income, not just creating deductions.
This is where most business owners get it wrong. They look backward and try to reduce taxes after the fact.
Successful business owners look forward. They use their numbers to guide decisions while there is still time to act.
This is also how larger strategies come into play, like the Buy, Borrow, Die Tax Strategy, where you build assets and use them strategically instead of creating taxable events. See my video: BUY BORROW, DIE TAX STRATEGY: THE MISSING STEP on the Torchlight Tax YouTube channel.
When your accounting is current, you’re not guessing. You’re operating with clarity.
You can reinforce what’s working, eliminate what’s not, and make decisions with confidence.
Many S Corporations would be significantly more profitable if they simply managed their business in real time instead of after the year is over.
Accounting is not just compliance.
It’s control.
Contact Torchlight Tax for a free consultation at 877-758-7797 or fill out a form here. If you found this video helpful, please like it, share it, and subscribe to our YouTube channel.
To learn more about bookkeeping, accounting, tax saving, and asset protection strategies, visit our Torchlight Tax website and YouTube channel, where we have 400 blog articles and videos to assist you.
