Start Planning Now To Pay Less In Taxes Next Year
Were you shocked by your 2020 tax bill? If you were, you are not alone. Many business owners found themselves paying more in taxes than they expected to. And while 2020 may have had a few additional surprises due to the pandemic and the handling of some of the assistance programs, it wasn’t the only year some business owners faced a surprise bill from the IRS. One way to avoid a surprise like this is to do create a tax plan.
Tax planning involves creating and implementing various strategies in order to minimize the amount of taxes paid for a given period. For a small business, minimizing the tax liability can provide more money for expenses, investment, or growth, and, in this way, it can be a source of working capital. Tax planning and reducing the amount you pay is not tax evasion. These are distinctly different – at least they should be. A Tax Consultant knows much more than a tax preparer about the IRS rules, and can help you legally reduce the taxes you pay.
The goals of tax planning include:
- Reducing the amount of taxable income
- Lowering your tax rate
- Controlling the time when the tax must be paid
- Claiming any available tax credits
- Avoiding the most common tax planning mistakes
You may think that it’s better to overpay your taxes than to owe taxes, and that the IRS will catch any mistakes you may make. That’s not the case. No one at the IRS is going to be able to find the mistakes you may have made that caused you to overpay, even if they did audit every return – which they don’t do. They can only audit or review what you include on your filing.
And even if the IRS does find overpaid amounts and sends a refund, the time the IRS has that money is a lost opportunity for you to use the money to benefit your business. You may, for example, put off purchases of equipment or inventory due to lack of capital or be paying interest on short term loans. That can limit your growth and profitability. Or you may not be able to give a valuable employee a raise, and end up losing that employee. These are more than inconveniences to your business. They can cause your business to fail.
These are just some of the many reasons why we meet with our clients monthly. Things change in business, and they can change dramatically in a very short time period. We like to stay on top of changes in your business to ensure you maximize the opportunities to grow and minimize the taxes you pay.
Tax planning is an ongoing process and good tax advice is a valuable commodity. How good was the tax advice you were given last year? Did you unknowingly overpay taxes? Schedule a Complimentary Tax Review and let us help you figure that out. If we find an overpayment, we can help you get that back sooner than next year.