Numerous tax experts agree that effectively addressing your tax liability requires planning and attention throughout the entire year. Business owners who reap the most benefits consider their taxes year-round, rather than waiting to focus on tax payments just a few weeks before the filing date.
A typical small business can qualify for roughly a dozen tax deductions, and it’s surprising how many never take advantage of these deductions, mainly because they suffer from the “tax-planning-happens-but-once-a-year” syndrome. To fully benefit from these deductions, it’s important to maintain your expense records throughout the year. Example deductions businesses may be able to claim include:
- Cars operated for business purposes
- Business-related travel expenses
- Purchases of office supplies, furniture, equipment, and software programs
- Telephone expenses
- Contributions toward insurance policies, retirement plans, and pension funds
As a business, we recommend that your goal should be to reduce your tax liabilities by retaining records of purchases and determining the proportion of business costs in combined expenses. By closely monitoring expenses throughout the year, you can analyze each expense for its tax impact as it’s made. Additionally, smart business owners should contemplate three key steps to tax planning:
1. Invest in the most effective tax record tools for your business. Whether it’s spending roughly $30 on journals and tax books with a set of refill sheets costing less than $10 to do manual bookkeeping or investing up to $2,000 on the latest financial management applications, you will benefit from more rigorous and accurate record keeping. Sure, the initial investment could be significant, but regular monitoring should facilitate tracking expenses and making advance payments, which will save you money in the long run.
2. Stay in touch with financial professionals for tax tips and planning advice. You may frequently need advice on unclear requirements in tax laws that could be in your favor. To prevent unnecessary complications and aggravations, you must avoid violating tax laws that may be applicable to your small business. If you are unsure of these laws, use the tools at your disposal, such as current software and online record keeping. Complement those capabilities with professional advice when needed to keep your taxes under control.
3. Establish year-round tax planning goals. Having a good tax planning strategy, maintaining clear records and having an understanding of your fiscal position throughout the year will help you accomplish goals including:
- Reducing the amount of taxable income
- Claiming any available tax credits
- Lower your tax rate
- Control the time when taxes must be paid
- Avoid the most common tax-planning mistakes
It is important to note that not all deductions are available in all situations, and rules often change frequently. To stay up-to-date, contact us to discuss which deductions apply to your company.