Things You Must Know About Business Tax Planning

In order to make sure that your business meets the long-term and short-term financial goals thoroughly, you must know how to do effective business tax planning. It is particularly more important when you are going through an economic downturn. Proper tax prep in advance helps you to keep your business financially solvent. While you are preparing for year-end tax planning and tax relief programs, you need to work out different ways on how to reduce your taxable income (on paper) and how to make the best use of the even the smallest possible (very little known) deductions. Those who never plan in advance often forget to use some of the less common deductions and thus end up paying more in taxes. Following are some of the most important things that you must know in this regard.

Discuss Things With Your Accountant

When the time for filing tax returns come closer, you must have a meeting with your accountant, where you must discuss various things associated with business tax planning with them. The idea is not just to review the current year’s performance but also set the projections for the next year. Pay special attention toward the kind of deductions that are available for you this year. The deductions you used last year may not necessarily be available this year also. Likewise, this time, you may also qualify for some additional deductions. Do a thorough research and brainstorming in this regard because tax deductions are something that can save you a fortune, which otherwise may just go to the IRS wallet. You may also have to change your tax strategies this year, especially if there have been some business related changes or changes on person front, such as the change in marital status.

Get Yourself Prepared For Premium Increases

If the health insurance premiums are expected to rise significantly in the coming year, you should consider increasing the deductibles and co-pays of your employees as part of your business tax planning strategy. You can enjoy several benefits by increasing the cash bonuses; for example, it can help you cut down the taxable income.

Deductions That Are Not Very Common

If you go through the legal documents regarding tax laws applicable in the United States of America, you will find that there is a very long list of deductions that tax payers can take advantage of. Though you may be well aware of the most common types of tax deductions because you have used it again and again every year, you may not have any idea about the least common deductions that you qualify for. As a general rule, any expenses that you pay for to ensure smooth running of your business is tax deductible. If you use a phone to talk to clients and vendors, the phone bills are deductible. If you use your car to perform business related works, any expenses associated with that car can be treated as a business expense and thus can be considered for tax deductions. Deductions, overall, must be an important point to consider while you are working on your business tax planning strategies.

Debt And Losses

You must have a system to document debts and losses related to your inventory. Your accountant may be able to give you business debt advice and tell you how to use those debts and losses for deductions. In order to ensure an accurate count, you are advised to have a system in your business that ensures documentation of all such inventory losses on a quarterly basis. Besides that, you are also recommended to keep proper records of several other things, such as collection-agency receipts, copies of mailed letters, e-mails, phone calls, and documents related to collection attempts.

Overall, when it comes to business tax planning, it can be a little complex and time consuming process. Make sure you have an expert and highly experienced accountant to assist you.