Owning a small business can be, on the one hand, an exciting and fulfilling experience. On the other hand, owning a small business can sometimes be frustrating and stressful, especially when it comes to taxes. Using the best tax planning strategies for your small business can help to relieve your stress and frustration by helping you to know exactly where your business is at financially, not only at tax time, but any time of the year.
Tax Plan #1-Record Keeping
One of the first steps in your strategy for creating a tax plan for your small business begins with knowing what the right tax plan is for your projected or estimated yearly income. An established bookkeeping and payroll system is key to you knowing where your business is at financially year-round, and at tax time, according to a personal injury lawyer.
For a small business, this type of record-keeping system can be a simple one. Keeping accurate records of sales revenues, income, and cash flow is essential in establishing your projected income. This includes the basics of being able to track billing invoices of cash coming in as income, and receipts of cash going out for purchases and expenditures.
Tax Plan #2-Quarterly Payments
Once you have established what your projected or estimated income is, the next step in your strategy is paying quarterly tax payments on time and appropriate amounts. Your quarterly tax payments for your small business can include federal and state taxes. Your small business may also be required to pay sales taxes if applicable.
For the best strategy, you want to pay enough in your quarterly estimated tax payments to cover the tax fees owed on your final net income at the end of the year. Paying enough in quarterly tax payments will not only give you peace of mind, but will also save you money by eliminating any accumulating interest on money owed for taxes, and any late payment fees.
For more information about when federal quarterly tax payments are due, the Internal Revenue Service has an interactive calendar on their website at irs.gov. For state, quarterly tax and sales tax payments contact your state’s department of taxation and finance.
Tax Plan #3-Mid-Year analysis
Taking a look mid-year at where your business is at financially is the next step in your tax planning strategy. Knowing where your business is at financially mid-year will help you to find any issues that may arise before income tax time. Is your income higher or lower than estimated? What does your profit margin look like? At this time if your income is higher than expected you can find ways to reduce your taxes, such as increasing the amount of money you pay into your quarterly tax payments. If your income is less than you had estimated you can adjust your spending, reduce the amount of money you are paying into your quarterly tax payments, and find ways to increase your revenue.
Tax Plan #4-Hiring a CPA
Overall the best tax planning strategy for small businesses is hiring a qualified certified public account. Not only can a CPA help you with your income tax return, but help you year round with the financial end of running your business. Hiring a certified public account may be an added expense for your small business, but it is one that is definitely well-worth the money.
Accounts can help with more than just your year-end income tax return services. Some of the services accounts and accounting firms may offer can include audits, reviews and compilations; retirement planning; estate and success planning; and bookkeeping and payroll services. Some certified public accounts, such as the Utah firm of Cook Martin Poulson PC, can also assist with family businesses including consulting, and family office services such as financial management.