Tax Planning for Businesses
If you’ve worked with a CPA at any point, you’ve probably heard of or been approached about Tax Planning. Tax planning is defined by Investopedia as, “the analysis of a financial situation or plan to ensure that all elements work together to allow you to pay the lowest taxes possible. A plan that minimizes how much you pay in taxes is referred to as tax efficient.” In short, tax planning is preparing your documents and essential information in advance to the tax deadline. By “in advance” we mean a few months before the deadline, not a few days or weeks. We know this sounds tedious and you, as a business owner, have a lot of other things to worry about. The truth of the matter is you will always have a lot to worry about, and if you’re not ready by the time the deadline rolls around, you’ll be a lot more stressed than if you’d just tax planned a few months ago.
Aside from saving yourself stress later, you’re probably wondering why you should consider tax planning. Here are a few of the benefits of tax planning for businesses.
Save Yourself Time and Error
By having an efficient tax strategy, you will avoid wasting time scrambling for documents near the deadline. How? You’ve already collected your documents, you know relatively how much you owe, and you know what purchases you can and can’t make. These are all things you don’t have to worry about during the busy season when you have a tax plan in place.
Additionally, you’ll avoid all common errors that occur when hurrying to put together a return. Some errors you’ll avoid by utilizing a tax plan are the following:
- Spending more than you should to increase potential deductions
- Making expensive purchases when you shouldn’t
- And not understanding your business’ tax liability
With tax planning, you’ll be aware of where you stand regarding your taxes and finances, saving you time and error when the deadline approaches.
Reduce Tax Liability
As a business owner, you want to pay what you owe in taxes, but not a penny more. Tax planning will get you there. If you start tax planning 4 months before the deadline, you have the time to speak with your CPA about all the deductions possible for your business. If you don’t plan, your CPA can’t give you that time because you two are focused on filing your return on time. Furthermore, taking your time with your taxes allows you and your CPA to file your taxes correctly thereby avoiding costly fees for noncompliance.
We’ll say it again, tax planning saves you money. That means all of that “extra money” can be funneled into other aspects of your business that will help it grow such as marketing, new employees, upgrading your systems, etc. Creating a tax plan also continuously teaches you about your finances, making you aware of what’s available, how you can invest in your business, and more. Growing your financial knowledge helps you grow your business.
Do I Need a Tax Plan?
Tax laws have changed a lot and they’ve been changing, so a tax plan is necessary to plan for what’s to come. Tax planning allows you to easily adjust when laws change instead of stressing about how much you owe when the laws change, and the deadline comes around. Furthermore, a tax plan is a critical part of your financial strategy because it factors into how much you owe, how much money you have, what you can spend, etc. We recommend you partner with a CPA like those at BaCo Group to start tax planning today. Starting is the first step to getting ahead, reducing how much you owe, and growing your business.
How do we Tax Plan at BaCo Group?
Oftentimes CPA firms offer tax plans as a special service done in addition to their normal tax prep work. This is because most CPA firms operate by looking backward, i.e., they spend this year filing last year’s returns. At BaCo Group, we operate off a current year model, doing tax returns in real-time. How? We utilize technology that gathers your data for you automatically and delivers it in real-time, so we are then able to plan year-round. Instead of spending the year preparing last year’s returns to go out the door, we spend the year planning for this year with you and your company, real-time. Tax planning is not a specialty service done after we prep your tax returns, it’s our main path towards delivering you real-time services, all while ensuring your return is prepared to be filed on time when the deadline occurs.
If you are ready to take advantage of a real-time tax plan that takes the burdens of gathering and delivering data off you and gives you a better understanding of where your company sits year-round, contact us today.
Published on Sep 21 @ 9:42 AM CDT