The year has already passed the halfway point. Isn’t it a wonder how that happens so fast? Before you know it, your plans to stay on top of your tax strategy either have been executed perfectly, or were forgotten a week after New Year’s… Either way, getting caught up now is far more attractive than waiting until the next new year!
With half the year finished, you can develop a good idea of how your overall financial goals are panning out as a business, and what you should do to stay on track or get back to where you need to be. The following are a few strategies to think about to ensure your tax savings are as big as possible for the next tax season.
1. Make Tax Changes to an Entity or Add Another
Having the right entities in place is extremely important when conducting a successful business that you’d like to be as profitable as possible. Making one entity change can save a company thousands of dollars over just one year. As you build your tax strategy, it’s okay to start a new business venture with one type of entity and then change it down the road as sales increase to ensure it’s being taxed as efficiently as possible. For example, at certain points in the life of a business setup as an LLC, it will be most beneficial to tax it as an individual if there is only one person running it. But as it gains momentum and adds employees, it will become better to be taxed as a C or S corp, where you would then pay yourself differently.
2. Find Out How and How Much Your Business Pays You
What position are you in your business, and how does the entity pay you, the individual? However you have it setup can have a major impact on the taxes you will be paying, and some strategies will attract more attention from Mr Auditor than you might like. It’s not too late in the year to find out and make necessary changes, so you’re not left changing the entire year and perhaps making documents look more confusing and untrustworthy right when you can’t afford them to be.
For example, sometimes it’s better to be paid as an individual instead of as a corporation, whereas in other cases it’s better to be seen as an employee, or a shareholder that receives quarterly distributions. Ask your tax planner what the best strategy would be for you.
3. Prep Your Documents
As mentioned earlier, it’s easier to prep documents each week or month, but if you haven’t had time, it’s better to do them now than six or eight more months from now for the entire year! The more detailed and accurate your documents are, the more prepared you’ll be if an audit rolls around, and the fewer deductions you’re likely to miss.
- Make notes on all business receipts, especially meals
- Log all driving miles for a business vehicle
- Take detailed records of any business trips or educational seminars
Doing all of these things may seem like a major undertaking, but once you have systems in place it can be very easy, and maybe even enjoyable if you remember all the tax savings you’ll be making.
