Did you know that more than 20 percent of large corporations paid little or zero tax on their income? They’re reducing their taxes by taking advantage of deductions and tax benefits.
If your business is growing quickly, it can be a challenge to keep up with the financial details. Tax planning is one area you shouldn’t neglect. Here are some reasons to pay attention to your business taxes as you grow your business.
Plan Large Expenditures
Most large assets are capital expenses, so you can’t fully deduct them in the year you buy them. Instead, a portion of the asset is expensed each year as depreciation. It’s possible to write off some assets (see Section 179 of the tax code) in the first year.
There is also a maximum allowed as a write-off per year. If you’re not sure what is allowed, check with a professional CPA before purchasing. They can help you navigate this section of the tax code and may be able to suggest an alternate option.
Obtain Tax Planning Services
Do some research to find a reputable tax planning company in your area. They can help you make an overall tax plan and may identify additional deductions that you weren’t aware of.
Some items, such as the Qualified Business Income Deduction, may allow a deduction of up to 20 percent of your share of the Qualified Business Income for the year. They can assist you with determining if you meet the complex rules. If you aren’t comfortable doing taxes, they can prepare them on your behalf.
Invest In Your Employees
As an employer, you can contribute to an employee’s 401k retirement plan, and your contributions will reduce your business income for tax purposes. Your employees will pay tax on the amounts they take out after retirement, but they won’t pay tax today.
If you contribute to employee health savings accounts or pay for certain employee insurance coverage, these costs are also deductible from your business income.
Plan When To Take Write-Offs
If you know your income in the current year is larger than next year, plan to write off any bad debts before year-end. This is an option if you use the accrual method of accounting. If you use the cash method, you can’t take advantage of this option.
Bad debts are customer accounts receivable balances that you aren’t able to collect. If you think your income will rise next year, you could decide to wait and take the write-off then.
Consider Other Expenses
It’s important to consider all expenses you may deduct as business expenses. You may deduct some costs for a home office or business use of your personal vehicle.
You likely use your cell phone a lot for your business. Other items might qualify as business deductions as well. Keep your receipts and ask your tax professional for assistance if in doubt.
Be Proactive With Your Tax Planning
Most people don’t think about tax planning until they have a large tax bill. We offer a team of skilled tax support professionals to help you eliminate surprises and save money on your taxes.
Schedule a consultation with Parker Business Consulting today.We look forward to doing business with you.
Parker Business Consulting & Accounting, P.C. is a unique firm with more than a combined 75 years of experience in private industry, coupled with a strong background in public accounting. This combination enables us to provide valuable assistance based on direct experience with many of our clients’ same issues.