Tax Strategies for Business Owners

There’s a huge tax benefit for businesses that no one may have told you about. Some business owners can save up to $100K or more in taxes annually, by using three IRS sanctioned tax strategies1.

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The Tax Advantage Layer Cake

Cash Balance Plan

Adding a Cash Balance Plan to a 401(k) Profit Sharing Plan is the most effective plan to help significantly reduce business taxes, because it has much higher contribution limits. Contributions are tax-deductible, so they reduce business taxes and personal taxes; and they grow tax-deferred. Annual contributions in a 401(k) + Profit Sharing + Cash Balance Plan can be more than $330,000. (For owners 60 or older.)

Profit Sharing Feature

Adding a Profit Sharing component to a 401(k) can help significantly reduce business taxes because this plan allows for employer contributions. Employer contributions are tax-deductible, so they reduce business taxes; and they grow tax-deferred. Annual contributions in a 401(k) + Profit Sharing Plan can be as high as $64,500.

401(k) Plan

A 401(k) Plan is an employer-sponsored retirement plan that comes with impactful tax advantages. Contributions made to the plan are deducted from taxable income, so they reduce personal taxes; and they grow tax-deferred. The individual annual contribution limit for a 401(k) plan is $26,000.


Case study

Find out how a business owner can save over $111K in taxes annually and turbo-charge her retirement savings.


Tax Savings Calculator

See how much you could be saving with a 401(k) Plan, Profit Sharing and a Cash Balance Plan.

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Free Tax Savings Guide

What you need to know to unlock huge savings. This guide features information designed to answer your tax savings questions.


Hear from a small business specialist.

Watch this short video from a Fisher small business specialist to learn how business owners can use IRS sanctioned strategies to reduce their tax burden and turbo-charge their retirement savings.

 

Show Video Transcript
Audio Visual

[Upbeat music]

Tax Savings Strategies.

Fisher Investments®

[The volume of the music is reduced]

Male Voice: A lot of small business owners don't realize how much they're missing out on tax advantage savings. You might be one of them. A tax strategy is a tool that small business owners can use to mitigate how much they pay in taxes and potentially increase how much they're saving for retirement.

A man dressed in a suit speaks to the camera. A flyout in the lower left corner identifies him as Matthew Cooksey, Business Development Team Leader.

An optimal tax strategy, utilizing the retirement plan can help business owners save upwards of a hundred thousand dollars on their taxes each year.

The camera zooms in as the man continues to speak.

Fisher investments specializes in helping business owners leverage their retirement plan to reduce their tax liability.

The camera zooms back out.

For example, a tax mitigation strategy we often deploy for high earning business owners is our three-layer cake strategy.

The screen turns white, and the text "Our Tax Mitigation Strategy?" appears. It fades out and is replaced by the outline of a cake with 3 multi-colored layers with progressively smaller sizes from bottom to top. Each layer is labeled. The largest layer at the bottom is labeled 401(k), the middle layer is labeled Profit Sharing, and the top layer is labeled Cash Balance. The words "Three Layer Cake Strategy" are displayed above the cake.

In layer one, the owner should maximize their personal retirement plan contributions.

The camera focuses in on the first layer of the cake, and the other two layers fade out.

Up to $26,000 each year for some individuals. This is important because these contributions reduce the owner's taxable income dollar for dollar.

The text "$26,000" appears above the cake and then disappears.

With layer two, the owner should maximize their retirement contribution they receive from the company.

The second layer labeled "Profit Sharing" fades in and becomes the main focus.

This can be up to $64,500 for certain individuals. In this case, it's important because it's a tax reducing business expense the owner gets to keep.

$64,000 appears above the cake before disappearing.

With layer three, add a cash balance plan. This is done in order to defer income beyond the limits of a typical 401(k) and profit sharing plan. Contributions are tax deductible, so they reduce business taxes and personal taxes, and they grow tax deferred.

The top layer of the cake (labeled "Cash Balance") fades in, and becomes the main focus.

In some instances, this can be upwards of $300,000 or more each year for the business owner.

The text "$300,000" appears above the cake and then disappears.

And as I mentioned before, for some clients, this can save them upwards of a hundred thousand dollars in taxes each year.

The text "$100,000" appears above the cake and then disappears.

Navigating this complexity takes professional guidance.

The camera zooms out to show the entire cake once again with all three layers.

Here at Fisher Investments, we have the expertise to help our clients optimize their retirement plans and achieve their tax mitigation goals acting in our client's best interest, so when you do better, we do better. That's the Fisher difference.

The words "Fisher Investments" are displayed above the cake.

The volume of the upbeat music increases.

Fisher Investments 401(k) Solutions.

© 2021 Fisher Investments®. Investing in securities involves the risk of loss. Intended for use by employers and their consultants, considering or sponsoring retirement.

Music fades out.

Screen fades to black.

Plan Comparison

Use this handy guide to determine how much pre-tax money you can contribute to your personal retirement plan.


Additional Resources

  • Small business owners smiling after saving big on their taxes

    Maximize Your Retirement Savings

    Save big on your personal taxes with a cross-tested profit-sharing plan added to your company's 401(k).

  • Small business owner sitting at lap top doing taxes

    Don't Miss These Extra Savings

    There's a new tax credit that can be as high as $16,500, and it isn't just a tax deduction--it's a tax credit!

  • Female small business owner sitting at laptop doing taxes

    The Powerful Tax Benefit for Business Owners

    Learn about a powerful strategy that helps business owners optimize their retirement program to save big on taxes.

  • High earning medical practice business owner saving money thanks to a profit sharing plan

    Profit Sharing

    See how one business owner saved over $51,000 a year by switching to a New Comparability Profit Sharing Plan.

  • Older small business owner smiling after saving money with a Safe Harbor plan

    Safe Harbor

    Find out how a business owner increased his personal annual contribution with a Safe Harbor 401(k) Plan.

  • Small business owner of medical practice meeting with patient.

    Cash Balance

    Find out how a business owner saved over $111K in taxes annually and turbo-charged her retirement savings.

  • Small group of employees talking about cash balance plans

    Cash Balance Plans

    Hear from a small business specialist to learn more about Cash Balance Plans.

  • Tax Savings Guide

    What you need to know to unlock huge savings. This guide features information designed to answer your tax savings questions.


Why Work with Fisher

Fisher redefines what it means to be a partner in retirement by providing superior financial guidance, unparalleled service and simple and easy program administration.

  • Your Interests First

    Incentive structures that are aligned with your success. No revenue sharing, no kick-backs or commissions. When you do better, we do better.

  • DIFY (Do It For You) Approach

    Our servicing solutions focus on doing everything we can for you. From acting as a single point of contact for your plan to selecting your investments, we provide services that many other advisers can’t or won’t provide.

  • Superior Financial Guidance

    As one of America’s top financial advisors, we work with you to optimize your program and provide ongoing one-on-one financial guidance to maximize wealth generation.

  • Small Business Expertise

    We specialize in small business retirement plans. As a result, we act as your advocate and have the knowledge, resources and clout to champion your needs.

  • 1There three strategies may not be a good fit for every business. Consult with a tax professional to determine if all, or some parts of this strategy are a good fit for your business.
  • 2Cash Balance Plans come with some risks and may not be a fit for some businesses. They are complex, and can be inflexible and expensive. Consult with a professional to determine if a Cash Balance Plan makes sense for your business.
Unlock IRS-sanctioned tax benefits.
Tax Savings Guide