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Tax Planning for Franchises

Written By: MB Group

If you're a franchisee, it makes dollars and sense to partner with the MB Group for strategic tax planning for tax planning for franchisesfranchises and franchisees. We will work closely with you to help save you time and money through personalized strategies, so you can grow, build wealth, and set up the type of retirement future you've always envisioned. Let's take a closer look at a few key considerations for tax planning for franchises. Don't hesitate to reach out to our team today for tailored tax planning solutions. 

Maximize Your Deductions

One of the first areas we start tax planning for franchises is with the legal deductions that are available to you and your business. We will carefully consider the following items as well as how they are factored into your tax situation:

  • Maximized depreciation
  • Home office deductions
  • Meal categories
  • Travel expenses
  • Hiring grandparents and children
  • Health care strategies
  • Medical reimbursement plans
  • Accountable plan
  • Fringe benefits
  • Home administrative office

Consider State and Local Taxes

When the majority of franchises start, your corporate presence may be limited to a single state or location. However, as you dedicate more hours to your business and it grows, it's likely your franchise will expand within the state as well as into other jurisdictions. Expansions can take on the form of physical locations or stores where your services and products are sold to your clients. 

In either case, it's important to consider how your expanding franchise could impact your local and state tax exposure. Your tax liability may evolve, and in many instances, these changes could be dramatic and unexpected. Even if you don't have a physical presence, such as an office, in a neighboring state, your sales team activities within this locality could create a presence that is taxable. When you partner with the MB Group, we'll work carefully with you to help you understand your local and state tax implications and how to move forward with the lowest possible tax liability. 

Optimize Tax Credits

There are a number of tax credits that are often overlooked by franchisees. One of these most overlooked tax credits is the FICA tip credit. The FICA tip credit is primarily applicable to restaurants and food establishments.

The FICA Tip Credit

Franchises that hire workers who earn tips may be able to claim a credit against their federal income tax based on the share of Medicare and FICA taxes you pay on employees' reported tip income. Because the calculation is anything but straightforward, it's important to work with an experienced accountant to maximize this credit.

tax planningStrategize Accounting Methods

Most new franchisees tend to select cash basis accounting instead of accrual basis. The former can be easier to understand and track because the company will pay taxes on income when it's received. In contrast, the cash basis method is related to cash flow regardless of accounts payable and accounts receivable. 

As your company grows, however, the accrual basis can offer you more insight and a more accurate long-term view of the financial health of your company. At the same time, the accrual method may provide you with several advantages of taxation, allowing you to deter obligation. Work with your franchise accountant to learn whether successfully converting accounting methodologies can minimize your liabilities. 

Sales Tax and Use Tax Considerations

The sales tax environment for franchises can be very complex and has recently undergone an immense transformation, primarily due to the Supreme Court Decision in June 2018 on the Wayfair Case. Because of this, it's imperative your tax planning accounting firm takes a closer look at what the new sales and use tax requirements mean to you. By doing so, you may be able to preemptively identify exposures that didn't exist previously before 2018 and effectively mitigate these risks through the VDA process. 

Contact MB Group for Tax Planning for Franchises

As a franchisee, you have a lot on your plate. In addition to marketing, managing, and growing your business; there are a number of matters that require your attention. Unfortunately, all of these pressing matters leave you little to no time to dedicate to tax planning. Fortunately, you don't have to do it alone. The team at the MB Group offers decades of experience and will help optimize your taxes through strategic tax planning for franchise businesses. 

Contact us today for strategic tax planning for franchises. 

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