Aug 19, 2021.
When you review your business’s finances, do you take time to consider how an effective tax strategy can help you succeed? If you are a small-business owner, taxes are a large part of your yearly financial planning. How much money did you earn that year? How much do you owe in taxes? What expenses are deductible? Proactivity is not an option — it’s a necessity.
Successful leaders plan and create strategies that help their businesses handle taxes in the most effective way possible. Here is how implementing tax planning into your business can save you money in the long run and tips for getting started.
This differs from tax preparation, which is defined as any action that has to do with preparing your finances and records for tax season. Annual filing is a yearly event where you detail your individual or company earnings and deductions for the previous year and submit a statement to the government. That statement is evaluated by the government, and you or your company then owes or is owed taxes.
Tax planning, on the other hand, involves using legal and effective strategies to minimize your risk and save money every year. Tax planning puts you in the driver’s seat of your company’s finances. Each month affords a new opportunity for you to evaluate your business and make small adjustments and smarter decisions.
As you get started with tax planning, there are a few things you can do to aid the process:
With any business, one of the keys to being successful is to make sure you are organized and prepared. It can be easy to get rid of receipts or not keep track of smaller expenses month over month, but with anything tax-related, the more records you have, the better. Any tax-planning professional will ask for detailed information and records of all of your accounts. But even if you are not working with one, it is vital to keep track of every monetary aspect of your company so you can create tax strategies tailored to its needs.
Creating or deploying systems to keep track of your expenses is a huge step. Setting aside time every month to not only do payroll but also to organize your business’s finances will only benefit your business in the long run.
Record keeping is a sure sign of a company taking steps toward success. Companies can also benefit from outlining clear financial goals. Determining goals for your company and deciding on a certain amount of money each month to set aside for savings, investments or anything that will help the company long term is a vital first step toward financial freedom.
Tax laws and programs are ever-changing. Taxpayers run the risk of neglecting to file a form that did not exist before. Tax-planning experts thoroughly research which forms are applicable and which changes occur year over year.
The Covid-19 pandemic is a perfect example of how tax laws and forms are always changing. Many American business owners received aid from the government through the Paycheck Protection Program or the Restaurant Revitalization Fund. These offerings were unique to that tax year, and many business owners needed help filing the necessary forms. Tax planners help you stay ahead of the curve, actively researching applicable loans, programs or other forms of tax relief.
A well-implemented strategy enables you to execute a tax plan customized to your business and its needs. Tax season and financial planning are much more effective, and a lot less stressful, when you have a strategy in place.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.