1 . Please discuss about the legal ways that a small business can avoid paying taxes. In...
Question:
1. Please discuss about thelegal ways that a small business can avoid paying taxes. In your opinion is it ethical or not?
2. Please deeply comment on the following text:
Small business owners and entrepreneurs should know that they are many different tax savings strategies that can be used in order to reduce the taxes that are being paid. Of course, paying taxes is something that every business should execute according to the law taxes, and for sure taxes have their importance on society to be able to fund public services, invest in education, healthcare, and others. However, reduce tax payments does not mean that the business is not paying it at all and is not following the law properly. Sometimes, it is important for business to reduce its taxes to be able to grow economically and open doors to new investments that are necessary, create more job opportunities, and increase their profits.
There are basically 5 ways that I can think of that can legally reduce taxes from small businesses. Employ a family member, once small business owners are able to pay a lower marginal rate, or even eliminate the tax on the income paid to their children. Second, start a retirement plan, because there are several retirement account options that maximize retirement savings and reap valuable tax benefits. Third, save money for healthcare needs, which is important because medical costs are still increasing and it is good to save money for unexpected healthcare needs. Fourth, change your business structure, once your business is taxed as a limited liability company, you may be able to eliminate the employer-half of the two tax responsibilities. And fifth, deduct travel expenses, knowing that business travels are fully deductible, small business owners can combine personal travel with a justifiable business purpose.
Based on that, it could be seen some ways to reduce taxes from small businesses, according to the law. In my opinion, if a business is denying to pay the taxes, that is not ethical and not right. However, if there are ways to legally avoid some taxes and reduce it, according to the law, would not be a problem with that, ethically speaking.
3. Please deeply comment on the following text:
Small businesses must understand the tax laws and regulations applicable to their industry and business structure to minimize their tax liabilities. They can use legal tax planning strategies, deductions, credits, and incentives to reduce their tax bills. Small businesses are very important in every economy, and reducing their tax burden can help them develop and create more jobs. On the other hand, taxes are vital for funding essential public services, including education, healthcare, and everyone. Nonetheless, there are several legal ways through which small businesses can reduce their tax burdens.
To begin with, they could deduct their business expenses. In other words, small business owners can claim deductions for business expenses, including rent, salaries, employee benefits, and supplies. Business expenses can significantly reduce a firm's taxable income and, thus, the amount of tax owed. However, it is crucial to understand that the costs need to be ordinary and necessary for the business and adequately documented. At the same time, small business owners can invest in retirement accounts, including individual retirement accounts (IRAs) or (401k) plans. Contributions to these accounts are tax deductions, thus reducing the business owner's taxable income. Moreover, the investment income invested in these accounts is tax-deferred until withdrawn in retirement.
Similarly, small business owners can take advantage of tax credits, such as the small business health care tax credit, the work opportunity tax credit, and the research and development tax credit. These tax credits can significantly reduce the business's taxable income and offer a way to transfer wealth to family members- tax efficiently. Tax credits are more useful for small businesses since they reduce the taxes owed dollar for dollar. These businesses can claim tax credits for various activities, including hiring and training workers, conducting research and development, and investing in low-income communities.
Business Statistics A First Course
ISBN: 9780321979018
7th Edition
Authors: David M. Levine, Kathryn A. Szabat, David F. Stephan