Tax planning refers to the practice of organizing your business’s financial affairs with the goal of minimizing the amount of tax that you have to pay. You can’t avoid paying tax, but you can use certain strategies to ensure that your business doesn’t have to shoulder an unnecessary tax burden. Tax planning initiatives are perfectly within the law, and when implemented correctly, they can help your business gain a great competitive advantage.
Your tax planning strategy can make or break your business. If you have a good strategy, you will end up with more money which you can reinvest into your business, and this will improve the quality of your products, your cost of production, and your ability to market your products. Tax planning is particularly important if your business has an annual turnover of more than $200 to $250,000. If you want to ensure that you have a good tax plan, contract tax accountants who have lots of expertise and experience on the subject.
Here’s where most businesses go wrong
Many businesses fail to fully take advantage of tax planning because they are let down by the accountants that they hire. Some business accountants fail to inform their clients about the various tax planning opportunities that they can pursue. If you are looking for accounting services, don’t restrict yourself to providers who offer services that are cheap and fast. Instead, you should try to find tax accountants who know how to strategize and how to get you the best possible tax plan before you have to file your returns. Also, as a business owner, you should ensure that all your tax planning is done early enough before the end of the financial year so that you can have more options and strategies at your disposal.
Tax planning for different businesses
There is no general formula when it comes to tax planning. As a business owner, you should hire accounting experts that will provide you with a unique strategy that is tailor-made for your company instead of trying to adopt a generic tax plan. That being said, some simple strategies that most businesses can benefit from include: paying off business expenses before the financial year ends, writing off obsolete assets, buying depreciable assets, and properly valuing their stock. Good business accountants will be able to tell you which strategies best suit your business, given your current financial situation, the structure of your business, and your long-term goals.
How to tax plan
When coming up with a tax plan, your tax accountants will need to understand the current structure of your business so that they can identify any shortcomings that can be improved upon, any new opportunities that can be pursued, and any changes that can be made so that the business is better adapted to new tax code provisions. The accounting experts also look at your profits and losses, your capital gains, and any tax breaks that you may be qualified for, and they find the best possible deal for you. Lots of businesses experience long-lasting improvements on their tax position after just a few days of tax planning.
Forecasting as part of tax planning
Forecasting is an essential component of tax planning. It is used to identify the best tax saving opportunities for your business. By forecasting, tax accountants are able to predict, with a reasonable degree of accuracy, how much tax you’ll need to pay. They are also able to present you with the best options that you can pursue in order to achieve some of your short-term objectives, and this gives your business a competitive edge.
How to choose the best accountant for tax planning purposes
As we’ve mentioned, for the purpose of tax planning, you should be looking for an accountant who has the knowledge, the expertise and the experience needed to create great tax strategies. If saving money is your goal, a fairly priced expert is better than a cheap accountant who doesn’t equip you with any tax planning strategies.