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wbjournal.com | March 7, 2022 | Worcester Business Journal 29 H ere are the top seven small business tax tips and deductions you can use to keep more of what you make. R&D credits for small business Research and development are lucrative for companies that undertake or sub out any design work. Manufacturing, construction, engineering, architecture, soware, and tech firms can benefit significantly. You can take the R&D tax credit every year. But you can also look back on the prior three to four years and reclaim unused credits, offsetting the taxes you've already paid. e result? A nice, surprising refund you can reinvest. Employee retention credits Congress approved enhanced employee retention tax credit rules. Business owners can claim up to $26,000 in refundable payroll tax credits per employee. Qualifications include revenue decline, capacity restrictions, supply chain disruption, commerce disruption, partial/full shutdowns, work from home orders, or vendor/customer restitution in 2020 or 2021 due to the COVID-19 pandemic. Business entities structure planning More oen than not, entity structure is a major consideration for a company at formation. But it's seldom looked at again as the company's situation changes, along with the ever-changing tax code. is results in substantial missed opportunities to optimize entity structure and minimize taxes. For example, C-corporations have the least flexibility in tax planning. As a result, they're typically not the best choice in the current landscape. e importance of entity structure choice is amplified when business owners consider their exit. In many cases, owners consider this too late and overpay their taxes significantly. Proper and timely planning allows for optimization of entity structure. Balanced compensation e nature of the qualified business income dictates income taxes and employment taxes the company and business owner pay. ere are many tax consequences when small business owners take money out of their business, whether W-2 income, distributions, guaranteed payments, dividends, etc. e best strategy requires an analysis to determine the most efficient compensation structure. Accrual vs. cash accounting e Tax Cuts and Jobs Act outlined new rules for small businesses, defined as those with under $25 million in three-year average annual revenue. One of those rules allows companies more flexibility when it comes to how they report income and business expenses. Companies can elect to change methods to provide a one-time significant deduction in the year of the change and ease in reporting going forward. Inventory reporting Like the accounting method changes, small businesses can look at different ways to report inventory on a tax basis using internal inventory policies. is could allow for ease in reporting and a potential one-time deduction for expensing a portion of your inventory. Cost segregation Cost segregation is a strategy for real estate owners, allowing for significantly accelerated depreciation deductions through the segregation of building components. Depending on the type of building, you can look forward to anywhere from 20% to 70% of additional year-one depreciation. By Eileen Y. Lee Breger Eileen Y. Lee Breger is an attorney with Worcester law firm Bowditch & Dewey, specializing in estate planning, tax strategies, special needs planning, and long-term care planning. 10) Plan for the worst. Make sure your money will never go to scam artists or an- gry creditors, or be wasted unnecessarily on long-term care. 9) Don't go it alone. All adults need a du- rable power of attorney, who is a person legally authorized to manage their affairs if they become incapacitated. 8) Protect your children. Set up a health- care proxy and durable power of attorney when they turn 18. Unless you get legal permission to serve as their agents before they become seriously ill, you'll need court approval to make healthcare and financial decisions for them. 7) A person's biggest potential creditor is a divorcing spouse. A spouse can take half of a person's inheritance in a divorce. Set up a lifetime asset protection trust to make sure your child's inheritance cannot be accessed. 6) Trusts can be financial lifesavers. Create this legal vehicle to hold money for safekeeping for your family. It will be over- seen by an independent called a trustee working as a financial watchdog. 5) Trusts are not just for the 1%. They can help anyone who can't manage their money, ranging from someone with spe- cial needs to those with substance abuse problems. 4) You can guarantee all your assets will be passed to blood relatives. You can set up a trust, so the funds only go to your children or grandchildren, avoiding a child's spouse. 3) Keep creditors at bay. Trusts can prevent money from going to creditors, such as someone suing an heir over a traffic accident. 2) Don't use up all your lifesavings on long-term care. MassHealth will pay for long-term care, if your net worth is low enough, and can't consider trusts designed to preserve assets. 1) You don't need to put money in trusts during your life. You can set up a trust to be funded with money after you die. K N O W H O W Top tax tips & deduction secrets for your business A bad hire sets off a chain of events that costs your organization in several ways. Time spent managing poorly performing employees is a drain on managers, eating away at your organization's competitiveness, slowing the time to market of products and services. All ultimately eat away at productivity and morale of those picking up the slack. And we haven't even touched on possible disruption to incomplete projects, litigation, lost customers, a weakened brand, or renewed job search costs yet. Here are some helpful hiring hints to avoid this problem. Don't overlook candidates as overqualified. HRAvailable.com's Elena Zaterka reminds recruiters employees with advanced skillsets are more likely to save companies money on training. It should not be assumed they will get bored or leave the organization in short order. "Potential exists for this employee to be promoted more quickly to higher level positions," she writes. "is is especially true when hiring for a large company." Other companies offering better benefits? Get creative, says Atlanta's Angelle Consulting CEO Clare Angelle. "I knew I couldn't compete on salary and benefits such as health insurance, 401(k), and swanky office space," she said. But she offered a clear path for promotions, flexible work, and four weeks' vacation time. "Research shows that employees with unlimited vacation take an average of 13 days off per year - less than the national average - for lack of clear boundaries," Angelle tells Inc.com. Focus on hiring even when you don't have a job to fill. Always be sourcing qualified applicants and scouring the market for talent, says Arte Nathan at SHRM.org. Fill your talent pipeline constantly, focusing on the benefits of the organization rather than any particular role. Employees, who are already familiar with the workplace culture, can help – either by applying to fill positions when they come up themselves, or by referring someone who might be suitable. 1 0 T H I NG S I know about... ... Protecting your family's money BY SUSAN SHALHOUB Special to WBJ 101: S M A R T H I R I N G BY RYAN FOLEY Special to WBJ W W W Ryan Foley is a partner at Worcester tax consultancy Cunningham & Associates. Reach him at rfoley@jec-llc.com and 508- 400-5827.