As the weather begins to cool, the leaves begin to change, the days become shorter, and the holidays approach, many of us turn our focus away from our business and towards our families. And while we all work hard throughout the year so that we can enjoy the holidays with our families, we do not want to neglect that now is the time to engage in some proactive tax planning. A few simple discussions now can identify some strategies that may save you thousands of dollars.
What are Some of the Things You Need to Be Thinking About For Proper Tax Planning?
1. Financial Records and Bookkeeping for Tax Planning
The first (and most important) thing is to make sure that your accounting records are caught up and accurate. Knowing your profit is the first step in knowing what/where we can focus to minimize your current taxes. Perhaps it’s time to buy the company vehicle? Or perhaps it is time to set up a solo 401k? Each of those strategies can reduce your taxes up to $15k. But that depends on if you have enough profit to absorb the expenses. So, bookkeeping is the FIRST thing we need to make sure is done prior to any tax planning.
2. Short-Term and Long-Term Business Goals
After we have a good set of financial records, we want to discuss your business goals with you: short-term and long-term. It might sound counter-intuitive, but not all tax planning is focused on reducing taxes in the current year. Our goal is to provide tax planning advice that matches your business needs. For example, if you are looking to expand operations in the next couple of years and will need bank financing, then we want to make sure we are showing good profits to secure that bank financing.
3. Depreciation can be a valuable tax deduction.
When done correctly, the purchase of large assets can offset a high tax bracket burden of up to 37%. Thinking of getting 37% off a major purchase? But the catch (and there always is one) is that you need to have taxable income to cover the expenses. For example, if I have $150k in taxable income, then buying a company van for $60k will reduce the taxable income and the tax savings would be in the 25-30% range (depending on other factors as well). However, if my company only has $25k in profit, then the purchase of the van and the $60k of depreciation would not be as beneficial as only $25k can be used in the current year and it will be at a much lower tax bracket of 10-15%.
4. Tax Credits
Tax Credits are important to analyze. There are hundreds of different tax credits and each state has their own as well. How can you stay on top of every possible credit? You can’t. We can help. Many credits may not be applicable to your business, but unless we have a discussion we will never know. For example, the ERTC is a major credit that was created and funded due to the COVID pandemic and many of those funds have not been used. If you’ve had more than 5 employees and your business was negatively impacted by COVID (who wasn’t?), you could get a tax credit of up to $26k per employee!
As you can see, tax planning can really save you money! All of our business subscriptions include annual tax planning sessions. If your business is on a subscription plan, expect to get your link to your tax planning session within the next couple of weeks. If your business is not on a subscription plan, let’s do a discovery call and discuss which of our subscription plans is right for you.
Proactive tax planning can save tens of thousands of dollars. Don’t miss out on this opportunity. Schedule your discovery call today!