6 SMART BUSINESS TAX PLANNING STARTEGIES TO CONSIDER

 

Business taxes and planning is the most important thing to consider especially when you are running a business and this can be done at the end of the year or at the start of the year for better planning and maintains of the business. Here are six strategies to consider.

1. Invest in business equipment, supplies and other assets

At the end of any fiscal year, businesses can reduce their taxable profits by purchasing equipment, supplies and other assets that will be used in the coming year. This can be a great way to reduce your taxes owed in one tax year, especially when you expect that the current tax year to have a higher taxable profit than the coming year.

2. Prepay for services you will need in the coming year

Similar to investing into business equipment, you may choose to prepay for a number of different services you will use in the coming year. This can include business insurance, business rent and other guaranteed fixed expenses.

3. Write off bad debts that have gone unpaid

Unpaid accounts may be eligible to use as a write-off on your taxes. This is done when the amount owed by a customer has not been paid and is expected to remain unpaid. By writing off this debt you can reduce your company’s/business tax burden for the current tax year. This process involves some potential complications, including the fact that if the customer ends up paying their bill in future, you have to reverse the write-off you gave yourself on your taxes. To ensure that this process is properly handled, it’s best to address bad debts in collaboration with your tax adviser.

4. Accelerate income or defer earnings based on profits projections

When it comes to certain year end revenues, businesses can use some creative accounts to accelerate income, which means claiming revenues early to count them in the current tax year. This is done to claim what you anticipate will be a lower tax rate, saving your business money in the long run. By contrast you can choose to defer certain earnings into the next year, this will give your business some much needed tax relief for the current tax year, while hopefully saving money on your taxes owed in the long run, if next year’s taxable revenue is lower.

5. Use retirement contributions and bonuses to reduce tax obligations

At year’s end some businesses may choose to provide end of year bonuses or retirement contributions to their employees, taking advantage of a tax break on these funds. If your business doesn’t offer a retirement plan, tax breaks exist to make this more financially appealing. Consult your tax advisor to make sure this process is handled properly.

6. Pay close attention to changes in small business tax law

It is important to be aware of these tax implications when planning out your year-end business taxes. To ensure you capitalize on all tax deductions while steering clear of trouble, you may want to consult with a tax advisor who specializes in business tax law.