Make Your Business Tax Strategy a Year-Round Process
Do you find yourself in a rush to collect documents and make payments when tax time rolls around? Focusing too much on year-end tax planning for tax season could be hurting the efficiency of your business–and the effectiveness of your tax strategy.
The most effective tax strategies require a year-round, proactive approach. This means factoring tax planning into each part of your business bookkeeping.
Year-round tax planning doesn’t have to be another burden for you as a business owner. You can make the process simple by incorporating regular tax strategy maintenance into your everyday business operations. Keep reading to learn how.
Start By Creating a Tax Strategy Calendar
You’ve likely used year-end tax planning strategies in your business. You can increase the benefits of those strategies by incorporating other tax strategies throughout the year. The easiest way to do this is by creating a tax strategy calendar.
A tax strategy or tax planning calendar can help you stay organized and accountable throughout the year. Your calendar can be as simple as notes on a physical wall calendar or as expansive as a detailed digital calendar that you can access on the go. Whatever you choose, the main benefit of your calendar is to remind you of important tax planning and deadline dates, including:
Quarterly estimated tax payment deadlines
Tax filing deadlines
W-2 or 1099 filing due dates
Your tax strategy calendar should also include dates that will help you stay on track throughout the year. For example, you might receive a recurring invoice payment at the beginning of each month. Adding a note in your calendar can help you set aside a portion of that invoice for tax purposes.
Align Your Business Plan with Tax Strategy
Your year-round tax strategy should take into account any major business decisions you’re facing, such as:
Investments
Expansions
Acquisitions or mergers
These irregular changes to your business could have major tax implications. Additionally, accounting for these changes to your business could help you reduce your tax liability.
Businesses buying new equipment, for example, might want to use the Section 179 deduction to depreciate the new property. This deduction allows you to deduct the depreciation of business equipment immediately rather than deduct smaller increments each year.
Keep a Close Eye on Your Financials
Day-to-day cash flow management is a standard part of your work as a business owner. However, have you considered how that ongoing management could be used to improve your tax position?
Keeping a close eye on your business financials will help you identify trends and assess your tax liability. In turn, you’ll be able to make strategic tax decisions based on your current financial situation.
For example, you might notice an influx in revenue for the year, which likely means a larger tax liability. By keeping an eye on your finances, you can move up the purchase of a major business expense to offset the increase in revenue, effectively reducing your tax liability.
Stay Up-to-Date on Changes in Tax Laws and Available Credits and Deductions
Tax law changes. A lot. It’s important as a business owner to stay on top of changes that could affect your business. Bookmarking the IRS business tax newsfeed could be a good way to stay on top of federal changes.
However, you might not have time to keep up with all the tax changes or might be unsure which changes affect you. This makes having a trusted accountant essential to your business. Your tax advisor will stay on top of tax law and regulations changes for you, so you can focus on running your business.
You should also take time to review your potential tax credits or deductions. A knowledgeable tax advisor can help you stay up-to-date on changes to deductions or tax credits for which your business might qualify.
Keep Your Books Clean
The key to an effective accounting plan and tax strategy is accurate bookkeeping. Without accurate, clean records, all of your tax strategies could be ineffective.
Additionally, clean books make it easier for you and your accountant to identify potential new strategies.
Take the time to review and audit your books throughout the year. A regular monthly check-in is generally advised to help catch potential errors.
Meet With Your Tax Advisor Regularly
An effective year-round tax strategy means you work with your tax and financial advisors. Your tax planning calendar should include regular meetings with your accounting service, tax planner, or financial advisor so everyone is on the same page.
These meetings help set aside dedicated time to discuss your financial goals and the current status of your business. Regular meetings with tax advisors also give you a chance to review your tax strategy and make any adjustments as needed.
Still looking for the right accounting advisor for your business? Accounting Made Accessible provides expert tax and financial advice for businesses of all sizes. We’re experts at creating a tax planning strategy your business can use year-round to help alleviate tax burdens and financial stress. Book a call to learn how we can help your business today.