How Pandemic-Stricken Small Businesses Can Lower Their Taxes
President/CEO of Joseph’s Premier Real Estate; professor of finance, business, real estate at IRSC; author of Madness, Miracles, Millions.
As the 2020 election heats up, small businesses are eager to see the candidates’ plans for small business tax relief. This is especially important during the Covid-19 pandemic, which has shuttered more than 1 million small businesses and still threatens millions more. Many small-business owners are cash-strapped and desperate for any semblance of tax relief. If they save more in taxes, America’s most dedicated job creators will surely invest in business expansion. I believe that with enough cash on hand, employers will invest in their workers — and their workers' families.
In the meantime, there are ways for small businesses to lower their effective tax rates. Here are just three of them:
Create a 401(k) retirement plan with profit sharing.
Employees appreciate small-business owners who invest in their retirement. Such investment signals that employers genuinely do care about their workforce — beyond a base salary and vacation time. Indeed, nearly 60% of working Americans participate in a workplace retirement plan.
However, a retirement plan can also benefit employers. By introducing a 401(k) plan with profit sharing, whereby employers make pretax contributions to the 401(k) plan on a quarterly or annual basis, small businesses can deduct those contributions from their taxes (for the previous tax year). Not only does 401(k) profit sharing boost employees’ retirement savings without increasing...
Courtesy of Forbes