Every year, when tax season hits, many business owners scramble to gather everything they need, or think they need at the last minute. Yet, on the other hand, there are those business owners who appear calm, cool and collected with everything under control. So, what are they doing that you’re not? The answer is, they are either accountants or they follow a business tax plan.
Tax planning is the process of finding the best tax options by determining how to conduct business within your tax bracket to increase your bottom line by reducing or eliminating tax liability.
Creating a business tax plan in Utah will be an ongoing process broken down into a monthly review of your income and expenses, then meeting with your CPA or tax specialist quarterly to analyze your options. An established tax plan will help you take advantage of the most beneficial deductions, credits and provisions available for business owners.
There is a more manageable (less ‘taxing‘) way to face tax season. Call Froisland Law today for your no-obligation consultation for business tax planning in Utah at 801-290-2130.
Determine Income Projections
The first thing you’ll need to do is estimate income for the coming year, both personal and for the business. Determining the income projections will provide a clear view of what tax bracket you will be in. This is important because while certain strategies work well within one tax bracket, they may end up costing you big time if your projections are too far off.
Now keep in mind that your income estimate is a rough calculation and will not be exact, unless you have psychic powers. But an estimation based on what you already know through the general business plan should give you a pretty good idea of where your income will be. Take everything into consideration, like projected sales revenue, cash flow income, and all expenses including incidentals (costs incurred in addition to the main expense).
The more accurate your income projection, the more effective the tax plan will be. If sales are down or there is a boom in business, there is no reason to worry. Your monthly income and expense review will give you a heads up of any notable change. Then you can talk to your accountant about adjusting the tax plan and tax bracket, if necessary, at your quarterly meeting.
Top Tax Planning Strategies
There are several tax planning strategies available for business owners in Utah. Whether your goal is focus on your personal tax situation or strictly centered around the business, a well-structured tax plan should include a number of goals that will overlap to provide you with the best possible outcome. Here are the top tax planning strategies for Utah business owners:
- Ensure you have the lowest tax rate available to you by making certain your business structure suits your current needs.
- Browse through the list of possible tax credits for business owners. Don’t assume the General Business Credit will cover everything you’re entitled to.
- Identify every possible deduction including contributions to your 401(k), healthcare deductions, charitable contributions, etc.
- Understand and utilize the most current tax reform from the Tax Cuts and Jobs Act (TCJA).
(h4) Eric Froisland is a full service tax attorney with 15+ years’ experience helping Utah business owners arrange their business organization to maximize tax savings, understand the benefits of tax planning and assist with reducing business tax liability and debt. Let Froisland Law help with your business tax issues, so you can focus on the things that matter most to your business.
Avoid These Common Tax Planning Mistakes
While tax planning for your business will help you side-step a lot of organization and reporting errors, there is still plenty of room to make common mistakes that could end up costing you big bucks. Make sure to avoid these common tax planning mistakes:
- Establishing the wrong business structure will not only affect tax credits, provisions and deductions; there could be other legal and financial consequences as well.
- Solution – It is important to identify the most advantageous entity formation that is in line with your company’s current and future goals. Call Eric with Froisland Law today to ensure you, your personal estate and your business are secure and legally protected.
- Missing (or under-paying) quarterly estimated tax payments that have scheduled due dates each year on January 15th, April 15th, June 15th and September 15th.
- Solution – Fortunately the IRS has recognized that the number of individuals who have to pay penalties for missing or under-paying their estimated tax payments has risen dramatically and have compiled ways to help avoid these penalties, that include:
- Put money for taxes away in a separate account as you receive it, this ensures that the money comes from the gross income to which it applies.
- Avoid estimated tax penalty at the end of the year by paying a least 90% of your tax during the year.
- Readjust your tax plan with changes in income, hiring (or firing) an employee and large purchases for the business, etc.
- Complete and file the correct form(s) with the IRS on time.
- Solution – Fortunately the IRS has recognized that the number of individuals who have to pay penalties for missing or under-paying their estimated tax payments has risen dramatically and have compiled ways to help avoid these penalties, that include:
- Math Errors are the easiest and most common problem for individuals and business owners alike.
- Solution – The best advice to avoid IRS penalties for errors in accounting is to get help from a professional. A bookkeeper will keep finances on track, a CPA will ensure all your financial bases are covered and an experienced local tax attorney can help you get back on track with the IRS and help you move forward with:
- Setting up a payment plan with the IRS
- Making an offer in compromise to settle your tax debt
- Filing a penalty abatement request
- Solution – The best advice to avoid IRS penalties for errors in accounting is to get help from a professional. A bookkeeper will keep finances on track, a CPA will ensure all your financial bases are covered and an experienced local tax attorney can help you get back on track with the IRS and help you move forward with:
While the Utah State Tax Commission has compiled a list of helpful links and instructions for business owners, the details can be overwhelming. For help organizing your business structure, protecting your assets through estate planning and establishing a tax plan to safeguard you and your company, contact Eric with Froisland Law at 801-290-2130 today.