When it comes to planning your taxes as a business owner, it always pays to form a game plan for the approaching new tax year to help lessen the impact come April, and here are a few tips for doing exactly that:
- Register your business as an LLC
With the ill-advised assumption that their business is defined as ‘small’, owners often fail to choose the correct corporate entity for their company. By becoming an LLC, some self-employment taxes can be eliminated as well as providing you with other tax benefits, especially since the new tax law was passed.
- Keep abreast with changes to tax laws
Being aware of any tax changes and knowing how they might affect your business, is critical if you’re to make the right decisions for the future, and for preparing your tax return and getting it right. Some tax changes were beneficial to the taxpayer, while others were not, but either way, you need to know which ones are relevant to you and your business.
- Take advantage of IRC Section 170(e)(3)
There is a generous, but often unknown tax benefit afforded to C-Corporations by the Internal Revenue Code Section 170(e)(3), and if your business sells goods of any description, you should know about it. With the power to turn a chronic corporate liability into a strong financial asset, it takes the form of a legitimate tax deduction. This is currently a well-kept secret, but armed with the right knowledge, C Corporations could help to drastically alter the way the country disposes of unprofitable inventory and make NGO’s able to help those in need in a more effective way.
- Purchase Captive Insurance
Captive insurance is when a company creates its own insurance named as ‘captive’, and any premiums paid to the Captive become a tax deduction for the company, and not income. Upon succession of the Captive, the money will be taxed but at lower dividend rates and allows for indefinite deferral of earnings. There is a little compliance and tax work involved with Captive Insurance, and as a small business owner, you’d need to check with a tax professional with this type of insurance would be beneficial for you.
- Organize your records
This timeless tip is perhaps one of the most important when it comes to planning your taxes but is equally the most frequently overlooked. Don’t let January and February being taken over by a huge rush to get your books and receipts up to date, by getting organized well in advance of the filing date. The easiest way to ensure that you meet your tax deadlines is to use the services of a professional tax planner, but you will still need to provide them with a certain amount of information that has been properly filed and organized.
Planning for your taxes can be a real headache for even the most organized of business owners, and most would strongly recommend that a professional be on board to help minimize the stress and the risk of facing penalties for late or inaccurate filing.