From human resources, sales and marketing, to accounting, business owners have many things to consider. It simply isn’t possible for one person to specialize in all matters of the business. This is why savvy business owners spend a considerable amount of time locating the best talent for each position. While each role requires different skills and experience, one thing remains the same – each has some form of tax element attached to it.
Although most business owners have heard of “business tax planning”, many aren’t sure exactly what that means. Tax planning refers to the activities taken to minimize tax liabilities to ensure all available allowances, deductions, exclusions, and exemptions work together in the most tax-efficient manner to reduce the total tax bill. For businesses owners, tax planning strategies can allow them to achieve both their business and financial goals.
Business tax planning provides numerous benefits to businesses of all shapes and sizes. In addition to lowering the amount of taxable income, tax planning gives business owners greater control over when their taxes get paid.
Every year, it seems like business transactions get more complex. As this occurs, the way that businesses get taxed increases in complexity as well. Business owners today must take several things into consideration when planning for taxes, especially if they do business across multiple jurisdictions.
Federal corporate tax code changes rapidly, and businesses often struggle to remain compliant. Another issue facing business owners today, it can be difficult to identify potential tax savings opportunities. Unfortunately, many of these opportunities have a limited duration or target highly specialized aspects of the business’ operations. Without extensive knowledge of corporate tax law, business owners may fail to realize the benefits of important tax breaks.
For many businesses, taxes become a barrier, preventing growth and profitability. Every year, business owners around the U.S. lose thousands of dollars in unclaimed rebates, benefits, charge-backs, and deductions. However, with proper tax planning, corporate tax codes can offer valid opportunities for business owners to take advantage of, reducing the amount of money spent on taxes.
Profitable companies often pay a significant amount of money in corporate tax. When this occurs, efforts like marketing and new product development become less important than paying the tax bill. Corporate tax planning makes it possible for business owners to retain more profits, enabling them to roll more funds into marketing and other efforts aimed at growing their business. This can make all the difference in the world in today’s competitive market.
Although the types of tax deductions available varies by business and industry, business owners of large and small businesses can take advantage of many basic tax planning strategies. The most common business tax planning strategies include deferring income or profits, bringing forward costs, and capital allowances.
In order to receive the greatest benefits of corporate tax planning, business owners must first understand their federal tax bracket. The United States has a progressive tax system. The more taxable income a business makes, the higher their tax rate will be. Therefore, it only make sense that business owners should reduce their taxable income.
One of the most basic techniques, businesses can slow their income by delaying sending fourth quarter invoices until the following year. In order to gain the greatest benefits of this technique, the business owner should make any large purchases before the end of the year. This not only delays taxes on fourth quarter income, it also allows for deductions against current, rather than future, income.
Before executing any business tax saving strategies, business owners must consider both their current and projected income to ensure the greatest benefits. While deferring income might help some, business owners that expect to make more money in the future should collect their income now. This is the only way to ensure the greatest tax savings. A certified financial planner (CFP) can help business owners decide the best business tax planning strategies for their unique situation.
Business owners have many things to consider when deciding the best tax planning strategies for their business. In addition to ongoing tax code changes, deciding on the right techniques and tax planning strategies takes careful consideration of both current and projected income and changing market conditions. Business owners can benefit significantly from contacting an experienced financial advisor. Investing in corporate tax planning now can save business owners a lot of time and money in the future.
Dechtman Wealth Management provides business tax planning services designed to help business owners reduce their business tax liability, maximize cash flow, and reach their financial goals. Our experienced financial advisors keep up-to-date with current tax laws and work directly with each of our clients to help them achieve financial success.
Please contact us for more information about our corporate tax planning services.