The Importance of Tax Planning Now
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If you’re like most small business owners, the topic of taxes isn’t high on your priority list at the moment. With Black Friday, Cyber Monday and upcoming holidays on the horizon, it’s understandable. However, a few hours or more devoted to tax planning now can save you time – and money – down the road.
Here are several things you should consider now to get a leg up on the tax front:
1. Don’t Go It Alone
Unless you’re a tax professional, resist the urge to be your own tax advisor and find someone who is capable and trustworthy. A good tax advisor can save you hundreds or even thousands of dollars a year through smart, strategic planning. Not surprisingly, good advisors often come via word-of-mouth recommendations. A Google search can also reveal viable candidates along with reviews and rankings.
2. Rethink Retirement
Retirement planning can yield more than long-term financial security. By properly using retirement saving vehicles like IRAs, 401(k)’s from a previous job and other tax-advantage accounts, you can reduce your taxable income and overall tax burden now. A professional will advise you on what options you have and where to focus.
3. Adjust Estimated Taxes
If you pay estimated federal income taxes quarterly, how you handle the last payment for 2016 can have a significant impact on your tax bill for the year. While it’s due by January 15, 2017, paying it by December 31, 2016 will allow you to deduct the amount on your taxes for 2016. Your last estimated payment is also an opportunity to pay more, for instance, if you’ve had an uptick in fourth-quarter business, or less, if the opposite occurs. Either way, your advisor can help you determine how much to pay and when.
4. Update Business Expenses
If you’ve been lax in logging business related expenses, now is a time to get a handle on what you’ve spent, where you’ve traveled, how much mileage you’ve put on your vehicle, etc. The sooner you get up to speed, the easier it will be to provide your tax advisor with accurate, documentable proof he or she can use when preparing your taxes. Did you know that most businesses underestimate the mileage they accrue in a year? A convenient app you can download on your phone can change this. Here are three you may wish to consider.
5. Think Charitably
Donations and gifts of cash made to charities are an excellent way to reduce your tax bill. Most are deductible, and determining the value of non-cash gifts has been made easier by software and online programs such as TurboTax ItsDeductible. Like mileage, many individuals underestimate the value of their non-cash gifts. With the help from the latest programs and the insights of your tax advisor, you can make every deduction count.
While tax season is months away, you can make the most of it by finding an advisor and planning now to do everything you can to minimize your burden when the time comes. These tips and a sense of urgency now will help.