The pandemic caused adverse effects on businesses as the lockdown changed things from the normal mode to a standstill. More economies got stalled as the pandemic progressed, and it’s still threatening millions of other businesses to date.
Small business owners are the most affected and with limited resources. There is no cash in circulation since products and services are no longer moving as usual. The entrepreneurs are desperate for cash relief to save money and make a come-back for their businesses.
Saving more on taxes will cause job creators to invest in business expansion. This will protect their businesses from collapsing. Employers will have adequate funds to invest in their employees and the employee’s families. No matter the current situation, small business owners can lower taxes in the following ways.
Create a 401 (K) Retirement Profit-Sharing Plan
The best way to appreciate employees is by investing in their retirement. That’s a sign that employers care about the welfare of their employees. It’s not only about paying the staff salaries or taking them on vacation but also ensuring that they have a better retirement. A good number of Americans have a designated workplace retirement plan.
A retirement plan does not only benefit employees but also employers. A profit-sharing 401(k) plan will enable employers to make pretax contributions. The contributions can be quarterly or on annual basis.
Introduce a 412 (e) Plan
Most small businesses are private entities, and it’s not always easy to manage such setups. For some, a one month subpar can affect the business, and that even gets worse during a pandemic when things get more challenging.
When entrepreneurs invest in a 412(e) plan, they enjoy annuities and life insurance. That’s why the plan exists. It allows small business owners to build private investments. It secures other costs like contributions to retirement plans and payrolls.
The contributions made are deductible for small businesses. It’s good to note that employers who want to invest in this plan should make contributions with guaranteed annuities. They can also combine life insurance and annuities.
Invest in a Section 125 Cafeteria Plan
Paying your employees medical bills is one of the most significant ways to appreciate them. But such contributions can lower taxes. Section 125 cafeteria plan is the best fit for the employer’s tax benefits. It’s a code in the Internal Revenue Service that every employer can take advantage of. In this case, the base salary can be convertible to nontaxable benefits.
The cafeteria plans cover employee-related medical care. It is deducted for the staff’s paycheck before paying taxes.
When small businesses invest in the cafeteria plan, it helps them save on the Federal Insurance Contributions Act. They also save on State Unemployment Tax Act, and the Federal Unemployment Tax Act.
Remember: Each dollar is important. The three ways above can help employers save on taxes and bring a significant change in their businesses. Seek professional help from an accountant or a tax attorney with adequate knowledge in small business operations. An expert can give an employer an in-depth understanding of the tax savings.