The Importance of Tax Planning Strategies for Small Business Owners

small business tax planning
September 8, 2023

As the U.S. Supreme Court prepares to hear a landmark tax law case in the fall of 2023 and a number of COVID-19-related tax breaks are steadily eliminated, tax planning for small business owners is more important than ever. 

Tax laws are constantly evolving and changing, and without a strategy in place, it’s easy to let opportunities to save money throughout the year slip through the cracks. The 2024 tax filing season is still months away, but the advantage of tax planning now is that you’ll be well prepared for the future.  

An expert in accounting services for small businesses can help with the first steps and can conduct a comprehensive review of your current tax strategies. Our professional team makes sure that your hard-earned income stays in your pocket.  

Tax management for businesses is inherently complex, and with a world of changes imminent or on the horizon, now is the time to enlist a personal and corporate accounting services provider who understands these intricate changes. Also, it’s important to have tax experts who help your business navigate the terrain ahead. 

Get in touch with a tax professional now or closer to the April 2024 deadline to discuss tax planning concepts for your business. Doing this can help avoid any unpleasant surprises regarding your income, expenses, and overall tax liability when your taxes are due next year.  

What Does a Tax Planning Strategy Entail? 

Tax planning for small businesses is inherently different and much more complicated than personal tax planning, although it’s not unusual for the two arenas to become intertwined.  

Tax planning strategies for a business require a comprehensive and analytical review of the company’s financial standing.

This involves:  

  • identifying legal and opportunistic methods to minimize tax obligations.  
  • leveraging shifts in income to optimize tax benefits.  
  • utilizing tax deductions, credits, incentives, and exemptions.  
  • adhering to guidelines set forth by current or anticipated tax legislation and regulations.  

When it comes to tax strategies, your overall approach could be as simple as reviewing your daily expenses and finding ways to claim credits or deductions or as deep as looking at (and potentially altering) the structure of your company. The amount of taxes a small business pays year to year can vary due to a range of factors, including the business’ structure (like sole proprietorship, partnership, or corporation). Therefore, a finely tuned eye for all the details and the broad-stroke steps that can minimize your taxes is key. 

Tax Planning Tips for Small Business Strategies 

First, consider your tax status 

As stated above, your company may currently be a sole proprietor, partnership, limited liability company (LLC), C corporation, or S corporation. Therefore, you should initially examine whether you have outgrown your current structure or if another business structure is a better fit.   

The Tax Cuts and Jobs Act of 2017 dropped the top corporate income tax rate from 35% to 21%, so electing to make a change is no longer unusual and can be assessed and performed with the assistance of a corporate tax expert. 

Review Your Tax Deductions and Any New or Unused Opportunities 

As a small business owner, you likely have a hefty list of deductions you take every year. These include the cost of utilities, rent, equipment, and other expenses that are easily identifiable, and which are all part of the cost of doing business. 

But it never hurts to conduct a check-up to see if there are additional credits or deductions you can take advantage of to boost your bottom line. 

For example, if you conduct a large percentage of work from home (which is becoming more common in the post-pandemic era), you may be able to consider a home office deduction. Just remember that you have to do a significant percentage of work in your office. Also, your home office can’t be used for other activities – like as a living area. 

Another example of potential credits is to include your new and future employees. There are a range of credits that can save business owners money when hiring or retaining staff, such as the Work Opportunity Tax Credit (WOTC). This is designed to reward employers who hire individuals from target groups that have faced significant barriers to employment, or the disabled Access Credit (DAC), which is designed to help small business owners offset costs associated with providing access for people with disabilities. Your tax planning partner can help review your hiring strategies and ensure you are making smart moves when it comes to your employees. 

Defer or Accelerate Income 

Deciding whether to defer or accelerate income for any given tax year is a complicated strategy that requires a lot of review but can result in substantial tax savings over the long term.  

This strategy requires expertise on varying tax brackets, as well as an estimation of whether you’ll pay more or less taxes in the following year(s), to make the best decisions now. 

Develop the Best Tax Plan with our Professional Tax Experts  

Small business owners already have enough on their plate. That is why it’s understandable that many owners don’t have time to conduct an in-depth and heavily researched review of their business structure, operations, and costs to determine the best strategies for saving money on their taxes, year after year. 

However, this is exactly where the financial experts at Waters Hardy can help.

At Waters Hardy, we’re adept at conducting an overall review and finding smart and easily implemented strategies that can boost your bottom line for many years to come. 

 Let’s start a discussion about your current tax situation and how it can be improved. We understand that every business is different, and we tailor all of our tax planning strategies to your unique financial situation and goals to ensure that you have all your bases covered when it comes to saving money.   

A smart tax planning strategy can go a long way in helping your business succeed, and we are standing by to help pave the way towards a better financial future for you and your business.  

Contact us today!  

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