Have you ever been blindsided by an unexpected tax bill, or even worse, found out you are getting a large tax refund!? If so, you have been a victim of poor tax planning. While no one ever looks forward to paying taxes, we should also be wary of giving the government interest-free loans in the form of tax refunds. This is capital a business owner can use for more important things.
While there is no way to avoid paying taxes, there are ways to mitigate it. This is done with proper tax planning in the form of a hands-on tax projection prepared by a certified public accountant. A tax projection is usually done halfway or ¾ of the way through the year and looks at the period between now and when your last tax return was filed. This information is then taken to make an estimate of what your tax liability will look like should you remain on your current trajectory.
Among the many reasons one would have a tax projection done is for the sake of avoiding surprises. While this is certainly a huge relief, especially for small business owners who depend heavily on cash flow, there are many other reasons one would want to partake in the tax projection process.
By taking part in active tax planning before the current tax year ends, you are afforded the time to make changes and implement steps to reduce your tax liability. Unfortunately, once the year is over, there is very little we can do by way of tax planning.
Whether you choose to have a tax projection done or not, there are several things to keep in mind when transitioning from one tax year to another. The biggest variable a business owner needs to be aware of is an increase in revenue or decrease in expenses compared to the prior year. While growth and productivity are good things, it’s important to remember this usually translates to a higher tax bill the following year. However, with proper tax planning, these tax burdens can be mitigated or planned for properly to eliminate the pain associated with paying Uncle Sam his fair share.
Are you interested in having us prepare a tax projection for you? If so, please contact us at 352-369-1120 so we can connect with you to get started!