With your corporate and personal taxes now filed for 2022, you may think it’s time to forget about your taxes for a while. However, as a small business owner, the summer is the perfect time to focus on tax planning.
Working with a professional CPA firm, tax planning can provide business owners three key benefits:
Determine your estimated tax payment due in January, ensuring that your company avoids penalties and interest.
Understand what additional activities can be done this year to maximize your tax deductions and minimize your tax burden.
Plan ahead as you grow your business to receive the most advantageous tax benefits
Mid-year review. The first place to start in your business tax planning is to have a professional CPA firm conduct a mid-year review to give you an overview of your tax situation to date. This process includes looking at your company’s prior year tax returns along with your current revenue and expenses to determine any major changes in deductions or income. Depending upon the timing, the review could also include a projected estimated tax payment for your company to make in January. Findings from a mid-year review could be presented in a report or discussed in person.
Maximize your deductions. By doing an assessment mid-year, this gives you enough time to implement corporate and personal decisions to maximize tax deductions, such as making retirement contributions or donating non-cash goods if you are itemizing deductions on your personal return. By working with a CPA firm that manages both your corporate and personal returns, you get a full picture of your potential tax benefits and liabilities. And you learn how the activities of each side—personal and corporate—can impact the other.
Long-term planning. The tax planning process allows you to discuss your overall business objectives with your CPA firm on a regular basis. As your small business grows, together you and your firm can discuss how your business goals could affect your tax liability—positively or negatively. You can feel confident that the decisions you make for your company, such as implementing a healthcare plan or other benefits, are being executed in a manner that is financially beneficial to both you and your business.
Additionally, before you make major personal or business decisions, you should talk with your CPA firm to understand that decision from a tax perspective. For example, if you sell your personal home, you usually can take a tax exclusion. If you sell a rental home, you have to recapture all the depreciation that you previously took. The tax rules are completely different between these two types of sales, and it is beneficial to know that from the start.
Bonus benefit. As you become more comfortable with the tax planning process, you will start to develop a mindset to incorporate tax implications into all your business planning. This can give you peace of mind in knowing that as you make major financial expenditures, you understand the tax liability in whatever decision you make.
If you have never engaged in business tax planning with a professional CPA firm, it is time to begin this important habit. And if you already have a mid-year plan in place, start thinking about implementing a quarterly review.
Go here to learn more about business tax planning and other services provided to small business owners by Marlene Van Sickle CPA. If you are ready to get started with your business tax planning, contact us at taxteam@vansicklecpa.com.