August 28, 2015
Small business owners should be aware of the taxes that they are supposed to pay. There are several types of taxes a small business may have to pay such as income taxes (both federal and state), employment taxes, self-employment taxes, sales taxes and local taxes.
Many small business owners are good at performing their core business activities and often overlook the importance of tax planning. Small businesses need to do tax planning, a process of evaluating various tax options to decide how to conduct business as well as personal transactions to minimize or eliminate the tax liability.
Tax Planning is Not One Time Activity
Small business owners often assume that tax planning is a one time activity that needs to be considered only while filing taxes. However, tax planning is an ongoing activity where you need to analyze your income and your expenses on a monthly basis, if not on a daily basis. Then when you meet your tax advisor, you can take full advantage of the provisions that are legally available to you for tax avoidance.
Tax Avoidance and Tax Evasion
Here, we are saying ‘tax avoidance’, not ‘tax evasion’. Though they both sound similar, they are completely different. Tax avoidance is completely legal where you structure your transactions so that you reap tax benefits. Tax evasion on the other hand, is crime where you try to reduce your tax liability by deceit or concealment. One thing that sets tax evasion apart from tax avoidance is the fraudulent intent of the business owner.
Tax Planning Strategies
There are many tax planning strategies available for small business owners. Some are directed at the small business owner’s individual tax situation while some are aimed at the business. Regardless of whom it is targeted at, all strategies try to accomplish the following goals:
In order to achieve the above mentioned tax planning strategies, you need to have a good accounting system and hire a good small business accounting services company.
Good Accounting System
By having a good accounting system in place, you will be able to track your income and expenses accurately. This will help you calculate and file taxes perfectly. Also a good accounting system will help you plan ahead and pay your taxes on time.
Why Hire an Accounting Services Company
Expert accountants help you with more than just recoding transactions and preparing reports. They analyze your business information and help you with tax planning and filing. Additionally, qualified small business accountants will be able to provide many other business services. Here are a few of them:
One thing you need to remember here is, not all accountants have business management expertise. So make sure you are hiring someone who has decent experience working with small businesses like yours.
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