Tuesday, May 10, 2016

How To Plan Now For Next Year's Tax Filing

Once you’ve filed your taxes or asked for an extension, it’s time to get your house in order. In fact, because your most recent return is fresh in your mind, there’s no better time to plan for the upcoming tax year than in the spring.

Remember that every decision you make for your business could impact your tax liability. Hiring a new employee, purchasing equipment and even relocating your office can affect your bottom line and your business tax return.

Here are five tips you can you can use early in the year to plan for your future.

1. Review and adjust your general ledger.

Before filing the current year’s return, your tax professional should have analyzed all of your business’ expenses to determine if you are properly categorizing your expenses. These changes need to be reflected in your general ledger so that you’re on track and compliant moving forward. If your accountant didn’t give you recommendations on how to adjust expenses, ask for help.

2. Protect your income.

Did you increase your profit in 2015? Was your tax bill higher than you expected? It may be time to talk to your tax professional about how to mitigate your risk. In fact, if your accountant isn’t already helping you take action to avoid paying unnecessary taxes, it’s time to ask your colleagues for referrals to someone new.

3. Plan for growth.

If your expansion plans for 2016 include significant investments in your business, such as equipment or real estate, consult your tax professional on the best way to handle these in your books. You can also look at the timing of purchases to take full advantage of any tax benefits.

4. Review your form of ownership.

Having the correct form of ownership can make a real difference in mitigating your risk and exposure. Many options are available, and they each have differing pros and cons:

  • A sole proprietorship is a business owned and run by one individual who receives all the profits and has responsibility for losses and debts.
  • Partnerships, which exist in many formats, are business arrangements where all parties agree to cooperate to advance their mutual interests.
  • C corporations are taxed separately from the owners.
  • S corporations, or small business corporations, pass corporate income, losses, deductions and credit through to their shareholders for tax purposes.
  • Limited liability companies (LLCs) are flexible and blend elements of partnership and corporate structures.

5. Get an accurate financial picture.

Does your accounting software do what you need it to do? If it doesn’t give you a real-time, accurate picture of your day-to-day business, you may want to switch. For example, when a software program can’t perform simple tasks, such as accessing and sharing data with multiple employees or creating reports, you need something new. Look for a flexible and scalable system that keeps up with current industry trends. If you’re still keeping your books in an Excel or Numbers spreadsheet, that’s neither efficient nor accurate.

If you don’t think you have the time to review these areas now, make a goal to do so before getting further into the year. Don’t delay; it’s important to your company’s bottom line.

Source: http://www.forbes.com/

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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