Business owners want to make sure their taxes are done correctly. They don’t want to be penalized or fined for not filing on time. In an ideal world, taxes could be part of the equation without requiring too much energy. In reality, this is not the case and a lot of time is spent on taxation and accounting duties. Income tax, for instance, is a large expense for most businesses and individuals and requires careful planning, monitoring, and budgeting.
However, it’s possible to stay on top of your taxes and manage their effect on your finances by using reputable tax services. These services help businesses and individuals navigate complicated tax laws with confidence and a good strategy. When you understand your taxes, you can make more informed decisions about how to manage income, debt repayments, and other obligations.
Here are six helpful tax planning strategies that companies and individuals can implement to get a financial boost.
Properly Plan your Cash Flow
Thanks to the economy’s frequent upturns and downturns, most businesses take on both positive and negative cash flow high points. Tax bills can put a strain on a business or household’s budget, which is why it’s important to learn about how to prepare for them.
When you plan out your cash flow and anticipate your tax deadlines, you can make sure that the ride is both enjoyable and predictable. By doing so, you’ll be able to focus on more critical aspects of your business.
For example, it is necessary to be aware of what the tax implications are for you, your company, and your employees. If you are considering taking on a new project or expanding your business, it is vital that you consider what the tax ramifications might be and if you have any options for reducing them.
Business Property Deductions
In general, the IRS allows businesses to make deductions for property taxes that they don’t own but pay. However, the company must have some kind of equity or title to the property to make these deductions. Home office and home business expenses typically fall into two categories—fixed expenses that can be deducted each year, and variable expenses whose costs will vary from year to year, depending on the size of the business.
For instance, businesses may save a lot of money using a privately owned vehicle. It allows for the expenses of that vehicle to be deducted from their taxes without having to worry about whether they are appropriate or not. But the number of miles you can deduct from your taxes varies from year to year.
Establish your Annual Tax Plan
Tax planning is a short-term effort to reduce your taxable income. Identifying your short-term tax plan earlier in the year allows you to implement decisions all year long and not just at year-end. Short-term planning will help you think about what you can do today to help you get closer to your long-term goals. It’s necessary because large tasks don’t happen overnight.
Engaging your investment adviser in consultation can help them provide the business advice you need, and help you achieve your goals.
Advanced Tax Planning Strategies and Tips
When it comes to tax planning, some benefits occur long after the current tax year. These payoffs will still be experiencing their benefits even after the government lowers its taxes in the future. However, you can use a few advanced tax planning strategies to reap these rewards.
- Property Investment: Businesses that have been around for a long time and those who have had their name stitched on their building for generations, get to avoid paying taxes for years. But you need to be classified as a real estate professional by the IRS if you want to enjoy these benefits.
- Business Purchase: A business can take advantage of legitimate deductions without any additional paperwork or difficulty, making for a more profitable company overall.
- Roth 401(k): A Roth 401(k) can be used in ways that don’t apply to a Roth IRA, such as investment of appreciation in securities or income generated by rents.
- Smart Qualified Plans: Businesses can save on operational costs by using a retirement plan like a SEP. These plans allow not only for tax-deductible retirement plans but also allow for a much larger annual or lifetime contribution limit.
Proactive and timely tax planning is a safe way to reduce risk and protect your financial investments. You should always make sure you know what the rules of the game are so that you can play it well. Make sure you consult with your adviser throughout the tax year to save time and money. This will result in a more efficient process for all involved parties.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.