Since we've reached the fourth quarter, for those whose tax year is the calendar year the time has come to work out your year end tax planning. It's more than collecting documents and ensuring you have proof for each deduction. Yes, do those things. They are important. Perhaps more important though, is reviewing and considering possibilities to reduce your tax burden. Business owners will compare current year profits to the previous year to have a proper expectation if there will be an increased tax burden this year. Individuals will consider changing circumstances which affect their tax liability including, marriage or divorce, the birth of a child, sending a child to college or having a dependent child strike out on their own, thus no longer qualifying as a tax deduction when you file.. These factors and more can affect the amount of taxes you owe in a particular year.
A business that is experiencing high revenue growth will likely have a very different, perhaps even opposite tax strategy compared to a long established business whose profits are more even. When considering the sale of a business, the owner might choose show a higher profit when the increased value of the business at the time of the sale would offset any additional tax paid against that profit.
A business with more complex holdings will face many dynamic factors such as capital purchases, gains & losses, retirement / pension or profit sharing options and bonus programs as well as others.
With more than 74,600 pages of tax code, regulations and IRS rulings, it's a good idea to contact your tax professional to discuss your unique situation. With a proper understanding of the business and/or personal income for the current tax year, and a projection of expected increased or decreased income next year, your CPA will help you decide on the most advantageous strategy to optimize your tax savings.
Contact Accountability Team LLC to begin your year-end tax planning today.