As a CRNA and business owner, it’s easy to get caught up in the busyness of the day and neglect some of the housekeeping elements of running a business. Rather than wait until the end of the year to prepare for the upcoming tax season, make it a goal this year to get ahead of the game. Here are a few smart tax strategies CRNA business owners can implement this year with the goal of saving on next year’s tax return.
1. Stay on Top of Payroll
If you’re running a S corporation or a newly elected LLC S corporation, you are required to complete your payroll by December 31. Too often, business owners wait until the last quarter of the year to do this. Not only can this lead to last-minute organization but may also put you more at risk for an IRS audit.
We work with a number of CRNA business owners and recommend staying on top of their quarterly payroll throughout the year. Then, at the end of the year, you can make any needed adjustments to the amount based on your net-income.
2. Hire Your Children
It may sound strange, but adding your children to your business’ payroll can offer you opportunities to save on taxes. While your children must be paid for actual services they provide in your business, there are a number of ways you can do this. For your teenage children, you may hire them to help with office administration tasks, from filing to managing your social media or marketing.
There are a couple benefits to this. For one, if your children are under the age of 18 and you’re paying them through your business as a sole-proprietorship or single member LLC, your business doesn’t have to withhold payroll taxes or FICA (however, S or C corporations are required to withhold FICA). Additionally, your children can use their standard deduction against the income you pay them.
3. Implement a Retirement Plan
Hopefully as a business owner, you’re either offering a 401(k) plan, or have a solo 401(k) plan if you’re a sole proprietor. If not, consider doing so this year. This plan allows you to save up to $18,000 per year, pre-tax, or $24,000 if you are over the age of 50. If a CRNA business owner is typically in the 33%+ tax bracket, saving money for retirement before paying out taxes puts him or her in a great position to build wealth. Or, you may consider a Uni-K plan, or one-participant 401(k). This is a traditional 401(k) plan covering a business owner with no employees and sometimes their spouse. With a Uni-K, you can contribute up $53,000 per year for those age 50 or older.
And finally, in order to save more than what your 401(k) and IRA limit you to, you can set up a defined benefit plan. These plans have much higher tax-advantaged contribution limits and can be designed to fit the needs of almost any CRNA business. Depending on your age and income, a defined benefit plan allows you to set aside up to hundreds of thousands of dollars to fund your retirement, making it possible to save a lot, even if you have little time. Keep in mind, though, that this type of plan can be complex and costly and excess tax can apply if a minimum contribution requirement is not satisfied. Please be sure to talk to a qualified tax professional for more information.
4. Set Up Your Books
The start of a new year is an ideal time to set up your bank account and books. While it depends on the state in which you reside, some enforce franchise fees and taxes that make it more appropriate for CRNAs to file articles at the beginning of the year.
For example, if you paid too much in self-employment tax in 2017, you may get the title of your rental property transferred into your LLC. However, always consult your tax professional first to determine when is an appropriate time.
5. Maintain Records of Eligible Business Expenses
There are a number of benefits of being a CRNA business owner, and one of those is tax deduction availability. Business owners, freelancers, and sole practitioners may be eligible to deduct qualified business expenses on their annual tax returns. In order to qualify for these employee business expenses, you must be itemizing using Schedule A.
Common business expenses you may be eligible to deduct include business travel (including transportation and food costs), vehicle usage and mileage for business purposes, continuing education, and supplies and tools required for your position. However, in order to deduct qualified business expenses, you must maintain records to serve as proof (bank statements, receipts, mileage logs).
Getting Ahead with Tax Planning
Tax planning can help you potentially save in taxes paid. Because tax planning can be so beneficial, it’s recommended you don’t go it alone. The IRS tax code is very long and filled with various opportunities and strategies for optimal tax efficiency. The key is understanding how each possible opportunity works, and how it fits into your structure and long term goals. These strategies must be implemented by professionals in accordance with the law and on a foundation of honesty.
Consider working with a professional who understands the unique elements of CRNA businesses. Furthermore, to keep your business and personal finances organized and streamlined, consider integrating your tax planning with your financial planning.
With years of experience working exclusively with CRNAs, we have the knowledge to help you determine appropriate tax minimization strategies to help you save more of your hard earned money. If you encounter questions as you investigate some of these tax strategies, don’t hesitate to reach out to us. We’d be happy to help you review your options or offer guidance. You can call our office at 855.304.3748 or email [email protected].
About Jeremy Stanley
Jeremy Stanley is the founder of CRNA Financial Planning® as well as CRNA Tax Associates®. He has been providing advice and guidance for Certified Registered Nurse Anesthetists (CRNA) for over two decades. As a CERTIFIED FINANCIAL PLANNER™, Jeremy has met rigorous certification and professional standards set by the CFP® Board. He is committed to adhering to the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence when dealing with clients.
Jeremy is also the author of The Wealthy CRNA and A CRNA’s Life After Anesthesia. The Wealthy CRNA features insights into becoming a financially successful CRNA and how to start planning for your financial future, and has been prior approved for up to 4 Class A CE credits by the AANA. A CRNA’s Life After Anesthesia serves as your financial roadmap for a smooth emergence into retirement. It reviews recent changes in the CRNA industry along with the new rules of retirement and the final steps of legacy planning. This book has been prior approved by the AANA for up to 2 Class A CE credits.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.