Addressing your tax liability effectively requires tax planning throughout the year. Those business owners who reap the most benefits consider their taxes year-round, rather than waiting to focus on tax payments only a few weeks before the filing due date.
A typical small business qualifies for roughly a dozen tax deductions. For example, you can claim deductions on the following:
- Cars operated for business purposes
- Business-related travel and entertainment expenses
- Purchases of office supplies, furniture, equipment, and software programs
- Telephone expenses
- Contributions toward insurance policies, retirement plans, and pension funds
Many small businesses never take advantage of these deductions, however, mainly because they suffer from the “tax-planning-happens-but-once-a-year” syndrome. To fully benefit from these deductions, you must maintain your expense records systematically throughout the year.
Your goal should be to reduce your tax liabilities by keeping records of your purchases and determining the proportion of business costs in combined expenses. By monitoring your expenses closely all year, you can analyze each expense for its tax impact as it is made.
Business owners should also contemplate several key steps to tax planning. There are more ways than the following three tips, but these are a great place to start.
- Invest in the most effective tax record tools for your business.
Whether you are spending on supplies to perform manual bookkeeping or investing in the latest online software programs, your business will benefit from more rigorous and accurate recordkeeping. In some scenarios, the initial investment may be significant, but regular monitoring should facilitate tracking expenses and making advance payments, which can save you money in the long run. If you’re not sure what tool is best for your business, we can advise you on how to choose the best option for you. Find out more about our Software Solutions.
- Determine when you need to seek professional tax tips and planning advice.
Tax laws and regulations are confusing, cumbersome, and ever changing. When you need advice regarding unclear requirements, you should justify paying for professional tax services. A violation of the tax laws that could apply to your small business would create unnecessary complications and aggravations, and the advice of a professional can help you prevent those violations.
- Establish year-round tax planning goals.
A good tax-planning strategy will help you accomplish some of these goals:
- Reduce the amount of taxable income.
- Claim any available tax credits.
- Lower your tax rate.
- Control the time when taxes must be paid.
- Avoid the most common tax-planning mistakes.
Plus, a year-end review can bring to light new tax-saving opportunities, introduce you to new tax laws for that year, and reinforce the benefits of taking advantage of your tax planning strategies. For details about how you can benefit from these strategies, contact Crippen today.