Proper business tax planning can be an overwhelming process from start to finish. Most, if not all, business leaders have many decisions to weigh at any given moment and taxes are not always at the forefront of considerations being made.
However, without being properly prepared, insufficient tax planning can lead to excess money being lost, either through improper filing or accrued penalties.
This article will highlight the benefits of making your taxes a priority year-round as well as show how they can be optimized to ensure your business is getting as much money back as possible from filing correctly.
Business Tax Planning Requires a Proactive Approach
When it comes to taxes, generally there are two approaches: reactive and proactive. In order to optimize your taxes, taking a proactive approach is ideal.
Creating a plan and following it throughout the year will set you on a path for a much smoother tax season.
For businesses, proactive tax planning can help you:
- Time expenses and income around the year-end to adapt to changing tax laws or business projections
- Define how much cash to set aside each month for quarterly tax payments
- Identify tax credits available to your business
- Anticipate audit and tax risks.
If you would like to read more on reactive versus proactive tax planning, you can read our article here.
What Happens When You Use Your Tax Plan Throughout the Year?
You Can Take Advantage of All Available Credits and Deductions
Knowing what credits and deductions are available to your business allows you to track your expenses in those areas throughout the year.
If you are aware of these credits and deductions, then you can take full advantage of them; this may mean making additional purchases and meeting requirements in order to get that advantage.
However, as any tax professional will tell you, proper planning will help you get the most out of credits and deductions when tax time rolls around.
You’ll Have Up-To-Date Records Come Tax Time
Keeping your records up-to-date throughout the year saves you time and a potential financial headache when tax time arrives.
In addition to saving you time and energy during tax season, up-to-date records will show you exactly how your money is coming and going in your business. This will allow you to make real-time decisions based on current data.
More informed decisions are yet another way that implementing tax planning strategies correctly can positively affect your business.
You’ll Have a Better Idea of What You Owe and When
Let’s take quarterly estimated tax payments as an example. If you are not familiar with quarterly estimated tax payments, they are taxes that business owners must pay based on earnings that are not subject to withholding. These taxes are then paid quarterly throughout the year based on your estimated tax liability rather than paying the full amount at the end of the year.
Having a well-built tax plan in place allows you to anticipate these payments and feel more secure in your quarterly spending knowing that you have planned ahead for these expenses.
You’ll Have a Pulse on Changing Tax Laws
Tax laws are ever-changing and can greatly affect your business. Being proactive and keeping a pulse on them throughout the year will help you stay prepared and reassured that you’re following the right course of action.
For starters, several recent changes to tax laws can be found here. Although not all changes will apply to each type of business, it’s evident that changes should be paid attention to and taken into consideration as they occur.
You’ll Save More Time and Money
All in all, proper tax planning leads to more money being saved by reducing your tax liability and allows for more of your valuable time to be spent on the things that matter most, such as growing your business.
Be proactive and give yourself a competitive edge by:
- Taking advantage of all available credits and deductions
- Keeping up-to-date records
- Knowing what you owe and when it needs to be paid
- Being aware of any changes to current tax laws that could affect your business – both positively and negatively
Consult a Business Tax Planning Expert For the Best Results
If building the ideal tax plan for your business seems like a daunting task or if you simply don’t have the time to dedicate to your taxes while focusing on other aspects of your business, consider consulting with a tax professional.
A tax expert will have a deep understanding of everything we have mentioned in this article and serve as a guide through this process. With over fourteen years of experience working closely with business owners, we at Pasquesi Partners would be happy to work one-on-one with you to develop a tax plan uniquely suited to your business and its needs.
Contact us today to schedule a consultation. We look forward to working with you.