Avoiding hefty fines for filing errors and inaccuracies isn’t the only reason why small businesses and entrepreneurs need to pay more attention to doing taxes. As any reputable CPA will tell you, tax planning yields plenty of advantages for your Nashville business. By analyzing your company’s financial situation from a tax perspective, you not only ensure tax efficiency but reduce tax liability as well. Here are some of the benefits you can look forward to.
Estimate Future Expenses
Tax planning can be extremely useful for predicting losses and expenses for growing companies. If you need to acquire new equipment or spend money for a business expansion project, you can take out a loan at the best time in terms of tax liability. Getting a loan when your peak income drops or near the end of the tax year will help you maximize tax deductions on loan interest. However, experts urge entrepreneurs to remember this rule of thumb: never incur additional expenses only to gain a tax deduction. It’s just not worth the risk.
Restructure to Pay Less Taxes
Your business classification plays a big role in determining your tax rate and liability. You may not know it, but switching to another business structure might actually make more sense for you. For instance, if you own a corporation and pay taxes on both company income and your own salary, you might want to look into restructuring it as a limited liability company that is not required to pay company taxes. The middle of the tax year is the best time to do this since it will give you enough time to apply necessary changes and get a head start for the next year.
Exploit Tax Law Changes
The federal government implements changes to the tax laws nearly every year. A great example is the Tax Cuts and Jobs Act (TCJA) that will affect businesses, individuals, tax exempt and government entities. Tax planning may allow you to take advantage of this significant overhaul of the U.S. tax system, particularly the 20 percent deduction for income from pass-through businesses. A CPA is in the best position to tell you what impact tax law changes can have on your company and how you can use them to possibly realize significant savings.
Extend Tax Due Date
Worried about missing the tax filing due date? The IRS offers several options to extend the time to file tax returns, but such requests are not always approved. Through tax planning, your accountant can help you identify which actions you should delay such as collection of payments and sale of assets. You may also not want to wait until the New Year for actions like purchasing real estate or equipment. These are some of the methods that can help delay the process.
Entrepreneurs need to get in the habit of planning their taxes as early as possible. With help from an accountant, tax planning can lead to sizable savings for your business.
Sources:
5 Tax Planning Tips for Small Business Owners, Forbes.com
The Advantages of Earlier Tax Planning, Chron.com
Running a Small Business Helps Disabled Parents Thrive
