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Posted by Abundant Wealth Planning LLC

Business Tax Planning

Business Tax Planning


It's never too early to start business tax planning. Every year, small business owners must pay income taxes and other types of taxes, depending on their particular circumstances. Fortunately, there are ways to minimize taxes, as well as personal and business costs.


What is tax planning, and how can tax planning help your business?

Tax planning is a long-term, strategic approach aimed at minimizing payable taxes.

This differs from tax preparation, defined as any action related to preparing finances and records for tax season. Annual filing is an annual event where you list the income and deductions of individuals or corporations from the previous year and send a statement to the government. The government evaluates this return, and you or your business owes or is owed taxes.

Conversely, tax planning involves using legal and effective strategies to minimize risk and save money every year. Tax planning allows you to take control of your business finances. Every month, you have a new opportunity to assess your business, make small adjustments, and make smarter decisions.


Understanding taxes and business costs

To help you with tax planning and business considerations, you must first understand the taxes and costs of your business. Here's a breakdown of what businesses typically pay:

  • Commercial licenses and authorizations: which depend on the location and type of your business

  • Income tax: which depends on the legal form of your business

  • Labor taxes: Although most payroll taxes are federal, some states have different costs for payroll taxes.

  • Self-employment taxes: which can be lower or higher depending on the total income of your business.

  • State and local income tax: which depends on the location of your business

If you're unsure where to start to understand these fees and costs, a good tax professional can help. Speak to an experienced corporate tax attorney and learn more about how they can help you prepare for this year's tax season.


Understand changes in tax legislation

Tax laws change regularly, and you must know how these changes will help or negatively affect your annual tax accounts. Under recent changes in tax law, for example, small non-corporations may have access to a 20% tax reduction on net business income, in addition to the usual deductions for corporations.

While it can be difficult to keep up with these changes in tax law, it is important to the health and well-being of your business. Don't worry, and you don't have to do it yourself. Your tax professional will follow up on changes in tax legislation for you. With this information, they'll provide you with professional advice to keep your tax life organized and clean, investing time and energy in the things you love.


Corporate Tax Planning

While trade taxes are inevitable, they shouldn't hurt as expected. A tax expert can help you understand your business' tax burden, plan to lighten or reduce it, and understand exactly what you are responsible for each year. An expert knows no one likes taxes, and their goal will be to help you take control of yours.

By educating yourself on the depths and downsides of tax law and identifying small changes and changes you might otherwise miss, you will be making sure tax law is not as difficult as you have always imagined.


Tax Planning Tips

When you start tax planning, there are a few things you can do to help with this process:

  • Organize your finances: One of the keys to success in any business is making sure you are organized and prepared. It can be relatively easy to get rid of receipts or not keep track of minor expenses month by month, but with all things taxes, the more documents you have, the better. Any tax planning professional will ask you for detailed information and records of all of your accounts. Still, even if you don't work with just one, it is essential to keep track of your business's monetary aspects to create tax strategies tailored to your needs.

Creating or implementing expenditure control systems is an important step. Spending time each month on payroll and organizing your business finances will bring long-term benefits to you.

  • Create business goals and take action to achieve them: Keeping records is a clear sign that a business is heading for success. Businesses can also benefit from setting clear financial goals. Determining your business goals and deciding on a certain amount of money each month for savings, investments, or anything else that can help your business, in the long run, is a vital first step towards financial freedom.

  • Work with a tax planning professional to stay competitive: Tax laws and programs are constantly evolving. The taxpayer cannot complete a form that did not exist previously. Tax planning experts thoroughly research which forms are applicable and what changes take place each year.

The Covid-19 pandemic is an example of the constantly evolving tax laws and tax forms. Many American entrepreneurs have received government assistance through the PPP (Paycheck Protection Program) or the RRF (Restaurant Revitalization Fund). These offers were exclusively for this exercise, and many business owners needed help filling out the necessary forms. Tax planners help you stay on top of actively researching applicable loans, programs, or other forms of tax exemption.


Stress-Free Tax Season

A well-implemented strategy allows you to execute a tax plan that is right for your business and needs. Tax and financial planning are much more efficient and less stressful when you have a strategy.


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