Tax planning is a strategic approach that individuals and businesses employ to effectively manage their financial affairs and minimize their tax liabilities within the bounds of the law. Whether it's maximizing deductions, utilizing tax-efficient investment strategies, or structuring business transactions wisely, tax planning empowers individuals and organizations to make proactive decisions that can lead to significant savings and overall financial well-being.
We asked entrepreneurs and business owners their insights and experiences on tax planning and here are the responses.
#1- Employing certified tax strategists
We engage a CPA firm specializing in tax strategy, planning, and coaching. Their team members are certified tax strategists, tax planners, and tax coaches. This has been a game-changer for us. I wish we would have done this 15 years sooner. Frankly, I'm surprised how many small business owners are unaware that they can and should explore the same tax benefits that the world's largest companies and the world's wealthiest people are leveraging.
Thanks to Jason Mudd, Axia Public Relations!
#2- Start at the beginning of the fiscal year
Tax planning starts just as tax season is approaching, however, tax planning should really start at the beginning of the fiscal year. This starts with having an exceptional bookkeeper that can help the entrepreneur keep on top of the books so that they can focus on being a rockstar in their business. Throughout the year all receipts are uploaded to an app that we use for tracking and this helps make the process seamless as we approach tax season. Typically three months before tax reporting is due, we have an appointment with accountants to make sure they have all information up to date.
Thanks to Sebastian Jania, Manitoba Property Buyers!
#3- Don't be later than October 31st
As a Business revenue strategist, Fractional CFO, and former CPA, I cannot stress enough the importance of strategic tax planning. Lack of planning can lead to fines, penalties or simply missed opportunities. Prepare your financials and review them on a quarterly basis. Then no later than October 31 you should meet with your tax accountant in order to look at a preliminary return in advance. This will then give you the opportunity to make decisions based on projected tax liabilities.
Thanks to Wendy Shore, Shore Advise!
#4- Use a spreadsheet for tracking
As a financial coach, tax planning is something I talk about often. For myself, I have a spreadsheet tracking all income and expenses itemized to prepare me for tax filing season. At the point when each quarter is due, I know exactly how much I have profited and I have 20-25% of that saved each month into a savings account. When it comes time for quarterly, I know exactly my estimate and already have it saved. Then, I make the payment and that is the end of it. It is simple.
Thanks to Gina Knox, Gina Knox Coaching!
#5- Time your taxes
Tax planning is made a priority for every client I work with. There’s an old adage to not let the tax tail wag the dog, meaning just because you derive a tax benefit from doing something, doesn’t necessarily mean it’s going to be the most cost-saving decision in the long run. That being said, basic things like taking advantage of retirement accounts, and health savings accounts, and trying to “time” your taxes by offsetting gains with losses can be helpful in reducing your tax liability now and in the future.
Thanks to Scott Sturgeon, Oread Wealth Partners!
#6- Take advantage of all the deductions
I try to take advantage of all the deductions and credits that are available to self-employed taxpayers. This includes taking advantage of the home office deduction, travel deduction, and business entertainment deduction. The home office deduction allows me to deduct certain expenses related to running a business from home such as utilities or rent payments. The travel expense deductions allow me to deduct costs associated with any trips taken while working such as airfare or lodging costs.
Thanks to Doug Ash, Doug Ash Photography!
#7- Have separate bank accounts
I encourage all my clients to get an understanding of their tax obligations and have separate bank accounts to make planning and saving for tax effortless. Many of my clients come to me after a few years in business and haven't been saving or planning for tax and end up with debts. All simply because they didn't know what their obligations would be. Often, tax planning is done in the last few months of the tax year, but for me, it is an ongoing, part of the business. I am a huge advocate for forecasting and ensuring as a business owner you know how you are tracking against that forecast.
Thanks to Stephanie Menere, Stephanie Menere Consulting!
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