Tax planning is one of the most important parts of running a successful business. Taxes can take a significant portion of profits, but there are steps you can take to reduce that burden.
Business tax planning is the process of organizing a business’s financials to reduce the amount of taxes owed each year. It is an important part of any business’s strategy, as taxes can have a significant effect on a company’s profitability. To be effective, business tax planning should be carried out on a regular basis throughout the year.
The starting point for any business’ tax planning should be the preparation of an accurate and up-to-date bookkeeping system. Bookkeeping helps the business to correctly calculate their tax liability year on year, and prepares them for any potential taxation that may be due. Among other things, bookkeeping can track expenses and generate profit & loss statements that are required for the filing of tax returns. Here are nine things you should always keep in mind when planning your business’s taxes.
Things to keep in mind:
1) Know your filing deadlines:
Different types of taxes and filings have different deadlines, and the consequences for missing them can be severe. Make sure to mark those dates on your calendar and always stay on top of them.
2) Take advantage of all available deductions:
Depending on the type of business you have and the industry you’re in, there may be different deductions and credits that could be beneficial to your bottom line. Make sure to research all of your options to be sure you’re not missing out on any potential savings.
3) Be organized with your bookkeeping:
Keeping accurate records of your expenses and income is the key to making sure you don’t miss out on deductions or overpay on taxes. Make sure to invest in a quality accounting software and keep diligent records of all financial transactions, so that when it comes time to file, you’ll have everything you need in one place.
4) Invest in a tax professional:
While it’s possible to DIY your taxes, it’s wise to invest in a tax professional for advice and help. Their expertise can be invaluable, and they can look for deductions and credits that you might otherwise miss.
5) Pay estimated taxes:
Depending on your income and other factors, you may have to pay estimated taxes quarterly. Make sure to keep track of these deadlines as well to avoid any potential penalties.
6) Understand your tax liabilities:
Different businesses have different tax liabilities, so make sure to research yours to avoid any potential issues.
7) Consider tax-saving investments:
Some investments, such as retirement plans, can be a great way to reduce your taxable income. Be sure to research all applicable options and plan accordingly.
8) Be aware of off-season breaks:
Depending on when you run your business, you may be liable for seasonal or vacation tax breaks.
9) Stay up to date on laws and regulations:
Tax laws and regulations are constantly changing, so make sure to always double check and stay up to date with the latest rulings.
Business tax planning is an essential component of any business. It involves the careful consideration of taxes, deductions, and other financial strategies to reduce a business’s overall tax liability. In addition to helping business owners save money, effective business tax planning can also make sure that they stay compliant with applicable federal and state laws. Tax planning can be a complex and overwhelming process, but with the right knowledge and planning, you can make sure that you’re taking full advantage of every option available to you. Remember these nine points and you’ll be that much closer to a more profitable business.