Creating a great tax planning strategy can help your business along by ensuring that you're not losing too much of your revenue and cash flow to paying taxes. Here are some of the hows and whys of small business tax planning.
Benefits of Tax Planning
There are a couple of key benefits of tax planning for small businesses. First, it allows you to maximize your deductions each year; once you understand what you may be eligible for in the upcoming year, you can coordinate your buying and selling strategies as needed. It may also help you to distribute your taxation throughout several upcoming years. If you anticipate that you will be making less money than usual in the upcoming year, for instance, you can strategize so that many more of your tax-deductible purchases fall in this tax year as opposed to the next.
A second part of tax planning may be strategizing about cash flow. Paying off your taxes at the end of the year may cause a huge hit to your cash flow if you're not ready for it. Tax planning can help you estimate the total amount of taxes you will owe so that you can set aside the money to pay them when required.
Who Helps With Tax Planning?
You may wish to hire an accountant who can take a look at your tax records from previous years to help you come up with a tax strategy for the future. Some companies hire accountants as one-off guides to help with tax planning, while others find it beneficial to keep the person on hand to actually do taxes (and other tasks) throughout the year. You may also wish to consult a tax reduction consultant who specializes in doing corporate or small business taxes. These specialists will be sure to know the latest updates to tax codes in your area, and they can help you strategize to reduce your future tax payments.
What's the Tax Planning Process?
To do proper tax planning, you'll need to look at your company's historical tax habits as well as your future needs. An accountant may pinpoint areas of deductions to take advantage of in the next fiscal year, based on things that you missed in previous years. Tax planning may involve projecting your income for the next few years so that you can be strategic about when to claim certain tax breaks and when not to. The services offered in any tax planning session vary greatly from company to company, so get a consultation from the tax services representative of your choice.Share