Stay Ahead of Law Changes & Protect Yourself Against Being Audited: Corporate Transparency Act and Reasonable Compensation

How to Save on Taxes

Tax law is constantly changing, and it is almost impossible to keep up with all of it, but thankfully, here at Molen & Associates, we are dedicated to help our clients save on taxes.  With each new president or change in congress members they make promises that they will “simplify” the tax code or that they are “cutting taxes for our benefit.” Unfortunately, the changes made sometimes do the opposite and it becomes more and more complicated with each of the new tax laws. We make it our business to know what these changes are, and how we can aggressively and lawfully get the most benefit out of these laws for YOU!

Remember “The Game of Life”? It’s the game where you have a car with blue and pink people in it, you spin a wheel, and you ride along the board picking up cards that determine what your life is like. Unfortunately, too many people think that is the way real life is. They think whatever cards are dealt to them they have to make it work and keep plugging along. They hope that the next card dealt is their ticket to greener pastures. Here is the good news: That is complete garbage! You choose your own future! Unlike Hasbro’s “The Game of Life”, you can make your own choices and make the best of any situation. It will not be a cake walk. However, once you have a plan and put in the hard work up front, you can set yourself up for success.

 What are the four types of tax planning?

  1. Federal Income – Individual or family tax planning focuses on knowing what your household makes (income), how you file your return and which tax breaks will provide the most relief.
  2. Retirement – Managing your taxes before and during retirement is key not only to limiting your tax liability once you’ve stopped working, but ensuring you have maximum control over your income and tax situation post-career and beyond.
  3. Estate – The IRS levies an estate tax on estates that exceed a certain assessed value. Because this value is relatively large ($11.4 million in 2019), most estates aren’t subject to federal estate tax and won’t need to worry about government taking a sizable chunk from inherited assets.
  4. Small Business – If you’re a business owner, self-employed or both, you face a unique set of challenges when it comes to paying federal taxes, making small business tax planning a critical, if not essential part of your overall business strategy.

 What is tax planning and its importance?

Tax planning is when you use all elements of a financial plan to ensure tax efficiency. You can use many different tools to reduce your tax liability. Reducing your tax liability now means more tax savings in your pocket. If you want to know more about how you can do this you can read this article in which I have outlined other ways you can put money in your pocket.

 How do I create a tax plan?

The easiest way to create a tax plan is to set up an appointment with one of our tax advisors. We can help direct you in the best direction for you based on your specific circumstances. It’s important to realize that not everyone’s tax plan will be the same. We will be able to analyze your situation and create the best plan for you.

If you already have a tax advisor or prefer to do them on your own, then the next best thing is to:

  • Organize all your financials.
  • Understand tax deduction requirements.
  • Evaluate the tax credits offered.
  • Use retirement and/or other types of funds to maximize tax breaks.

 How do I start tax planning?

You can start tax planning by reducing your overall taxable income, increasing your number of tax deductions throughout the year, and taking advantage of certain tax credits. Don’t rely solely on yourself or a friend to know all of the best tips and tricks. Even if you or your friend are a CPA or have done taxes in the past. It’s hard to keep up with all of the new tax laws and loopholes that are available. Paying a professional to take a second look at it and give you some tax planning tips could save you thousands!

 Tax Planning Strategies

The best way to use the new tax laws to your advantage is to familiarize yourself with and obtain a basic understanding of the available tax credits and deductions. If you don’t know what they are, or you are only aware of some of them you may spend more time and money on getting a “tax break” than it’s worth. I always tell my clients, “I’m not going to advise you to spend $1,000 to save $100. That’s bad advice!” It’s the same concept as using a coupon that saves you 10% on something you don’t need. As simple as it may seem, you would be surprised how many people will spend more money on things they think they need (but really just want) to save a little. Analyze your needs and make smart decisions based on those needs using strategies that save you more money in the long run.

 Tax Planning Examples

One tax planning example is to invest your savings into a retirement account such as a 401k, Traditional IRA, or Roth IRA. Depending on what tax bracket you are currently in and which tax bracket you expect to be in in the future will determine which account you want to use.

Someone who is currently in a low tax bracket may not be paying hardly any tax and should be able to afford to invest into a Roth IRA. Doing this will mean they pay the taxes now (at a lower tax rate) and not when they take their money out in retirement (potentially at a higher tax rate). The other advantage of a Roth IRA is that after you have had the money in the account for at least five years you can withdraw funds without penalty. Additionally, all earnings in the fund will also be drawn out tax free.

 Advantages of Tax Planning

There’s a reason for both why the rich are rich and why they stay rich. They use the services of people who know how to make their money work for them and who know how to manipulate the tax law to their favor. The advantages of tax planning are you will get ahead in your life and you’ll be able to get out of the rat race that most people find themselves in. If you want to know if you are ready for retirement yet, take a look at these statistics from

  • 84% of Americans have less than $200,000 saved by the time they retire, and 22% Americans have less than $5,000 saved for retirement. Of the Baby Boomer generation, 17% have less than $5,000 in retirement.
    • [That means about a fifth of retirees today are relying mostly on social security!]
  • Many Americans are aware of their lack of savings, yet few are doing anything about it. On average, survey respondents say there’s a 45% chance they’ll outlive their savings, yet 41% haven’t taken any actions to address the issue.

Don’t let this happen to you!

 Business Tax Planning Strategies: More ways to save on taxes

 How can I reduce my taxable income?

  • Reduce Your Tax Rate
  • Take Advantage of Your Filing Status
  • Earn Tax-Free Income
  • Take Advantage of Tax Credits
  • Maximize Your Tax Deductions
  • Shift Income to Others

 What are the three basic strategies to use in planning for taxes?

  1. Understand your tax bracket
  2. Know the difference between tax deductions and tax credits
    1. “Tax credits directly reduce the amount of tax you owe, giving you a dollar-for-dollar reduction of your tax liability… Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Deductions lower your taxable income by the percentage of your highest federal income tax bracket.”

  1. See if you should itemize or take the standard deduction
    1. “Taxpayers have two deduction options: a standard deduction or itemized deductions. While the standard deduction is the government’s built-in subtraction that you can take while preparing your taxes, itemizing is composed of individual deductions that, together, can help lower the amount of taxable income you pay.”

 Who should do tax planning?

Everyone should do tax planning, and everyone can. Only those who truly want to save money and are willing to take smart risks will be able to increase the effectiveness of their tax plan.

Hunter Lewis
Tax Advisor

The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

The Ultimate Guide to Streamlining Your Small Business Finances

Streamlining your small business finances doesn't have to be a complex puzzle. Running a small business is a thrilling endeavor, but it often comes with a multitude of financial responsibilities that can leave even the most passionate entrepreneurs feeling...

Navigating Self-Employment Taxes with Molen & Associates

Embarking on the path of self-employment is a dream many aspire to, and you're one step ahead with both the vision and resources to make it a reality. To ensure your entrepreneurial venture thrives without being encumbered by tax-related complications, Molen &...

Maximizing Tax Benefits for Your Home Office

How to maximize your tax benefits for your home office? For over four decades, Molen & Associates, a trusted tax and accounting firm established in 1980, has been aiding small-business proprietors and entrepreneurs in optimizing their tax advantages through the...

2024 Tax Updates

Navigating the 2024 Tax Landscape: What You Need to Know   Introduction: As we gear up for the upcoming tax season, it's crucial to stay ahead of the curve and be aware of the changes that will shape the 2024 tax landscape. In this blog post, we'll explore key...

Mastering the 199A Deduction: Your Ultimate Guide

How to master the 199A Deduction? Tax season often resembles a maze, with twists, turns, and seemingly endless complexities. But fear not, fellow entrepreneurs, for we're about to shed light on a powerful tool that can guide you through this intricate terrain—the 199A...

Cruising to a write off

How to cruise a write off? First things first, let’s remember our general rules that before we can deduct a business expense it must be ORDINARY and NECESSARY, meaning “An ordinary expense means it’s typical in your business, both [in terms of] amount [as well as in]...

Shielding Your Business: The Power of IRS Representation in Tax Matters

Tax matters can be a labyrinth of complexities, especially for small business owners juggling a multitude of responsibilities. The mere thought of facing the Internal Revenue Service (IRS) can send shivers down the spine. But fear not – there's a potent guardian in...

Corporate Transparency Act – Beneficial Ownership Reporting: Are You Prepared?

The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, introduces significant changes in beneficial ownership reporting requirements for certain entities operating in the United States. These regulations, set to take effect on...

The IRS is Cracking Down on S-Corp Salaries: How To Ensure Your Reasonable Compensation is Safe

The IRS is turning its attention to S-Corporations (S-Corps) and the salaries paid to shareholder-employees. Ensuring that you are paying yourself a "reasonable compensation" is crucial to staying compliant with the law and avoiding potential financial consequences....

Should You Be Making Quarterly Payments?

Tackling your taxes as a small business owner can often feel like a high-stakes game of strategy and a little guesswork. One of the key moves in this intricate game is mastering the art of quarterly tax payments. If you're looking to stay ahead in the tax arena and...

Request an Appointment Today

5 + 4 =

Call us at

Pin It on Pinterest

Share This