Tax Planning for Business
THE THREE PRIMARY GOALS OF TAX PLANNING
1. Assure that the client knows if necessary, when, and how much to pay in estimated tax payments during the year so as to avoid any underpayment penalty and interest charges.
2. Estimate the client’s taxable income in order to estimate total tax liability for the year. Note: This amount may be considerably more than the amount the client is required to pay in estimated payments during the year. For example, a client’s estimated total tax liability might be $40,000 but he may only be required to pay $25,000 during the year to avoid underpayment penalties. Therefore, he can defer the remaining $15,000 tax liability until the tax deadline. This allows the client to keep that $15,000 under his direct control (e.g., to earn interest) until the final tax due date.
3. Find legitimate tax strategies that would lessen the amount of tax owed.
WHO SHOULD ENGAGE IN TAX PLANNING?
1. C-Corporations: Planning is extremely important because C-Corporations always pay their own tax. End-of-year tax planning strategies can benefit both the corporation and the business owners.
2. S-Corporations: Even though the S-Corporation does not generally pay tax itself, the income is passed through to the individual stockholder; therefore, it is critical to estimate the profit or loss for an S-Corporation in order that this information be “plugged” into the individual stockholder’s tax planning strategy.
3. Partnerships and LLCs: Income or loss from these entities also pass through to the principals (see paragraph 2, above). Additionally, all or part of this income is subject to the additional self-employment tax. So, it is even more important to produce monthly financial statements and to consult with a CPA for tax planning on a regular basis throughout the year.
WHAT SHOULD I DO ABOUT TAX PLANNING?
Phone our office administrator at (703) 361-9068 and schedule a Tax Planning Appointment! Often, just one hour of our time will suffice for this purpose-certainly an hour well spent.
Prior to the meeting we’ll send you a checklist of relevant documents. Please be sure to bring them along to your appointment.