Issue link: https://www.ascpskindeepdigital.com/i/430862
Tax planning is something you can do—no, make that something you must do—throughout the year, even if you only fi le your income taxes once a year. There are three goals you should aim for in your planning: • Use tax-law provisions to your full advantage. • Maximize all of the tax breaks available to you by law. • Accelerate and increase all available tax credits and tax deductions. Here are just a few of the hundreds of tax-saving options that businesses and individuals often miss. However, just like making treatment plans for your clients, every person's situation is different— you should seek a professional in your local area to customize a tax plan to fi t you. INDEPENDENT CONTRACTORS/SPA OWNERS First, are you operating your practice under the right type of business entity? Most people start as sole proprietors, then, as their practice grows, they may establish a limited liability company (LLC) or corporation. Many business owners are operating with entities that were appropriate when they fi rst started their practice, but may not work as effectively in their current situation. Ask your tax professional to review whether your business entity is right for you. Another area that is often missed is not making the most of family employment. If you have children or grandchildren who help in a home practice—perhaps handling reception duties, cleaning, or laundry—offi cially hiring them can be a great way to cut taxes on your income. When your child becomes your employee, his or her fi rst $6,200 of earned income is taxed at zero. That's because it's the standard deduction for a single taxpayer—even if the child is your dependent. The next $9,075 is taxed at just 10 percent, allowing you to shift a lot of income downstream. Setting up an IRA for the child may create even more savings, as well as setting a good example for fi nancial planning. Of course, you have to pay family members a reasonable wage for the service they perform. Legally, a "reasonable wage" is what you'd pay a commercial vendor for the same service, with an adjustment made for the child's age and experience. The home offi ce deduction is probably the most misunderstood deduction in the entire tax code. For years, taxpayers feared claiming this deduction would raise a fl ag for an IRS audit. But Congress has relaxed the rules, so now it's far easier for legitimate home practitioners to claim this deduction without attracting unjustifi ed suspicion. Your home offi ce qualifi es as your principal place of business if you use it "exclusively and regularly for administrative or management activities of your trade or business" and you have no other fi xed location where you conduct substantial administrative or management activities. Even if your hands-on treatments are provided in another location, you probably qualify if you take care of the administrative work at home. EMPLOYEES If you are an employee (defi ned by the IRS as anyone who receives a W-2), there is not a lot of planning you need to do, beyond looking for deductions to claim. If you don't have a substantial amount of deductions, don't worry about itemizing them: the government gives you