If you are like most small business owners, the past few months have been filled with calls to the accountant in an attempt to organize finances and minimize tax liability. Additionally, you’ve probably undergone this last-minute ritual before, all the while promising to be more prepared next year. So why aren’t you? The best time to prepare for the future is the present.
Important note: the material provided here is for informational purposes only and is not professional tax advice. It is intended for our readers in the United States. Please consult a professional tax advisor to discuss your specific tax situation.
Louis Stanasolovich CFP, founder and president of Legend Financial Advisors Inc., suggests the following for planning a tax strategy.
– Tax Structure — Is your company a C corporation, S corporation or limited liability corporation (LLC)? How appropriate is your classification for obtaining your goals and objectives? Changing the tax structure to more accurately reflect your business needs could save the company thousands of dollars.
– Payroll Taxes — Some payroll taxes can be avoided by moving a portion of your and your employees’ salaries to fringe benefits — such as the reimbursement of a medical expense or a retirement plan.
– Internal Audit — Employees don’t always classify business expenses properly. Having a professional go over expense reimbursement forms can uncover deductible expenses missed earlier, and therefore reduce taxes.
– Donations — Donations of old computers and excess inventory to a qualified charity are an excellent source of tax deductions.
– Filing — Be sure that you file on time. The late fees and penalties incurred for late payment are not only costly, but easily avoidable.
Planning for taxes is not just a matter of saving money — it’s also about saving time. Every year, precious hours are lost looking for records, receipts and other papers. If you’re organized from the beginning, you’ll be organized in the end. Establish a system, and make it work.
Organize all outgoing expenses — keep accurate records of where all your money goes. Record your bank balance at the end of every day. When you receive a statement from the bank, organize all the processed checks, make note of those missing and file the statement.
Put all the invoices you receive in a file sorted by chronological order. Date everything — when it is received, paid and sent.
Establish a system for keeping track of receipts. Whenever an employee is in need of reimbursement, be sure to get the receipts and file them. There is no task worse than madly searching through the office for every receipt acquired over the course of a year.
Sit down and make a list of everything that went wrong with your taxes this year and what could go smoother next year. Look at the list and identify ways to solve the problems today — not a year from now. Simply by planning ahead, you can save both time and money at tax time next year.