How running a family business can bring about key tax advantages in 2021

As your tax reduction specialist, your business needs a strategic accountant who can not only understand your business concerns but also provide exceptional advice on tax reduction strategies. Having grown up around family businesses and having clients who currently own family businesses, I see a recurring issue of business owners leaving money on the table. The simplest way to reduce your tax burden is to deploy “income splitting” which simply means shifting income away from a higher tax rate demographic to a lower tax rate demographic. In addition, you can hire your son or daughter to work for you, the IRS allows a minor to earn up to 12,000 in non-taxable income, and you never have to pay FICA or Medicare taxes. Stock ownership is another path for you as a parent to save on taxes, as the tax code allows the first $2,100 dollars earned via dividends to be taxed at a kiddie rate.

For example, let us say that you have two kids, and you and your spouse decide to give each child $12,000 dollars. Guess what? that’s completely TAX FREE! The gift falls under the annual $15,000 federal gift tax exclusion. The benefits do not stop there, one of my clients had a very unique situation. The two partners started a fitness facility in the South Florida region a few year ago, the wife was an ex-accountant turned fitness entrepreneur who hired her husband to volunteer in the business and help her with sales and membership drives. Guess what? The IRS cannot come after you for payroll taxes unless you actually “employ” the person. If my client had hired an employee to do marketing and membership for her gym and let us say she paid this employee $36,000 per year, then her payroll taxes would increase by $5,508 (15.3% * 36,000). Instead, she ended up saving more than $5,000 dollars annually simply by letting her family member (spouse in this case) be a volunteer. The benefits are numerous when it comes to letting your family member be an actual volunteer rather than an employee. Also incorporating makes it easier in the future to continue the business in case the owner was to pass away. 

If you would like to learn about more tax reduction strategies feel free to reach out to me and we can discuss how to grow your business by massively reducing your taxes and streamlining your accounting.