Page 305 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes person can place pre-tax dollars into a retirement account. Having employees mean providing
for them the capability of doing the same. A company owner can also choose other employee
benefit plans to attract employees. Corporate tax planning involves looking out for employees
by offering retirement, cafeteria and medical benefit plans. Cafeteria plans allow employees to
use a portion of pre-tax income for medical or child care expenses.
There are many deductions that a company can take advantage of including start up costs,
business trip expenses, home office use, the use of automobiles, and other assets. The costs of
health care expenses are often deductible especially for the owner and dependents. In addition,
any contributions made to a health savings account are also deductible expenses. Business tax
planning includes knowing what plans provide the greatest benefits and implementing those
plans to not only provides benefits to the company but benefits to employees as well.

When starting up a company many of the initial expenses can be written off up to a certain dollar
amount. Some of these may include personal property like furniture or office equipment. Other
things that can be written off the first year of purchase include machinery, fixtures, storage
facilities, and other personal property. Other considerations when starting up a business include
travel, vehicle usage, home office, and uniforms. Corporate tax planning sources suggests making
sure that write-offs are legitimate business expenses. When using a home office for company use
only a percentage of expenses can be written off. Travel expense can only apply when the travel
is for the company. Combining company business with personal business must be taken into
consideration for any type of write-off to be legitimate.

There is a degree of burden that is felt from tax legislation by any and every owner. However,
there are positive ways that a corporation can comply with obligations and find ways to develop
a strong company otherwise. Business tax planning includes taking advantage of opportunities
to provide relief when possible. A corporate planning attorney can provide some good advice
on how to structure a company to be optimally successful while remaining compliant with
considerations such as paying taxes. Information can be found on the Internet that can help
prepare a new business owner with how to be compliant in every area when it comes to reporting
income and deducting expenses.

Task You are an individual who wishes to know the most suitable form of organization
among Sole Proprietorship, Partnership and Company. How would you deal with the
following questions?
1. What is the most appropriate structure for me, should I become a company?
2. Should I employ my spouse or children or bring them in as partners?
3. I am a partnership, what about introducing a company as a partner? What are the
benefits and downsides?
Charitable contributions are a great way for a company to save on taxes and help those in the
community. Many non-profit organizations are set up to help those who are less fortunate
within the community that they reside and some offer services to anyone who they can help no
matter where they are located. There are limits on how much of a contribution that can be
counted and the organization has to fit the guidelines used by the IRS to be considered a legitimate
charitable organization. Some of the ones who usually do qualify are churches, educational
companies, scientific or medical research institutions, those that provide true charitable services
and organizations who help animals. There is more information on the Internet about
organizations that truly qualify as charitable.

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