Company Financial Overview
Christmas Inc., in 2016 would be a modern company developing a great amount of business strategies, and using the latest technology to its full potential. Christmas Inc’s would of course be a Xtrategist Consulting client and our Certified Public Accountants would advise Mr. Santa to take as many tax deductions and credits to minimize the tax liability at the end of the year.
Elf (Child) Labor Deduction
If Santa decides to adopt every elf, he could actually take full advantage of the tax code. Every Elf between the ages between the age of 14 and 18 years of age could potentially create tax deductions for the company if they were Santa’s children. On Santa’s personal tax return he could also claim the adoption costs and the child credits.
Research & Development Credits
Since Christmas Inc. would be more of a manufacturing company, it would probably employ a significant number of engineers to develop new toys or to improve their internal software to serve all of their customers. All the research and development would qualify for a credit (dollar for dollar against any potential tax liability).
Wages & Salaries
Elves in the manufacturing facility would be qualify as full time employees and all salaries and benefits would be tax deductible. For these employees Santa would have to comply with all rules and regulations for IRS purposes and with labor laws.
We have all seen it, Santa is at every mall and every town in the USA, but only for approximately one month out of the year. For this type of labor Santa will could benefit from hiring self-employed individuals (Independent Contractors) to impersonate him. Outsourcing his appearances will help Santa achieve his marketing goals without loosing his focus on his core business.He will also benefit from advertising and subcontractor tax credits.
Shipping & Delivery Deductions
By Christmas day, most kids would have already seen Santa’s Contractors at the malls and shopping centers. It would make sense for Santa to outsource some of the deliveries to USPS, UPS or Fedex. He can schedule Shipments to arrive right in time for Christmas. Any delivery service would be happy to help Santa. Christmas Inc, will be eligible for tax deductions on shipping expenses and Santa will have less stress on Christmas eve and more time to celebrate Christmas with a Christmas Eve party with the Elves and other employees.
Entertainment (50% Deductible)
If Santa decides to throw a christmas party, Santa Inc. could benefit from tax credits related to entertainment too. All expenses related to a business entertainment qualify for 50% deductions. A Christmas party would be partially deductible for Santa.
Charitable contributions are ideal to minimize tax liabilities. All of us are aware of the generosity of Mr. Clause, so he will take full advantage of charitable contributions tax deductions and contribute to organizations who focus on giving joy to kids during the most wonderful time of the year.
Tax Tip From CPA
If by the end of December, Christmas Inc. is expected to report a lot of income, Santa’s CPA might advise him to slow down the pace of the income to reduce tax liability on it. He could invoice all customers with a 35 day payment term to reduce the cash inflow.
There are many tax deductions and credits for businesses like Santa Inc. Santa Inc. is an example of how a fictitious business could benefit from Xtrategic financial consulting. But we are in the business of helping real businesses. Contact us at firstname.lastname@example.org for more information on how we can help you reduce costs and increase profits. Ask us about our tax preparation services. It’s almost “that” time of year![:]