Tax Planning: The Only Time You'll Love MathSep 04, 2023
I can not count how many times I have cleaned up the bookkeeping for business owners and when the CPA does their taxes they are perplexed by why they owe so much in taxes.
The reality is they buried their heads in the sand, usually out of fear of the unknown, then did ZERO tax planning.
So they missed out on implementing strategies to help themselves lower their tax liability. On top of that they did not put aside any money to pay the taxes they owe.
Many small business owners ignore tax planning.
It is to your benefit to review your income and expenses monthly.
Then meet with your CPA, EA, or tax advisor before the end of the year to analyze how you can take full advantage of the provisions, credits, and deductions that are legally available to you.
Here a few things business owners need to know:
You are obligated to pay income tax on every dollar of revenue you generate.
You will be paying self-employment taxes.
You will likely need to pay quarterly estimated taxes.
Filing an extension only extends the tax return filing. You still need to pay your taxes by April 15th or so.
If you fail to pay or pay too little estimated taxes you will be subject to fines, penalties and interest.
The IRS will hold you responsible for educating yourself on changes that effect your tax liability even if you or your tax preparer make an honest mistake.
Tax Planning Tips:
Keep track of your income and expenses throughout the year.
Implement a tax strategy to reduce taxable income, lower tax rate, and claim credits.
Explore tax planning for your business and structure transactions tax-efficiently.
Stay up-to-date with tax laws and adjust planning accordingly.
Work with a tax advisor to maximize benefits and avoid mistakes.
Review payroll and employee benefits for tax compliance.
Keep accurate records of financial transactions and receipts.
Use available tax credits and deductions for small businesses.
Plan ahead for major transactions to minimize tax liability and maximize benefits.
By implementing tax planning strategies, keeping up-to-date with changes in tax laws, and working with a tax advisor, small business owners can take advantage of the provisions, credits, and deductions that are legally available to them.
Remember, tax planning is not about cheating the system, it's about taking advantage of the benefits available to you and keeping more of your hard-earned cash.
Because who doesn't love legally sticking it to the man and keeping more of their hard-earned cash?
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