Taxes are often the last thing on the minds of business owners. After all, there’s so much to do to keep things running. But thinking and planning for taxes is the best way to minimize your tax burden as a small business owner.
Each year, when you prepare and submit your filing, you think, “That’s it! Done with it.”
The ugly truth is, if you simply “do your taxes,” you are (likely) far from seeing your actual burden. Aka — you’re probably under or overpaying.
But tax planning requires a solid understanding of the code. It takes knowing potential pitfalls, experience with all available credits, and properly claiming all the deductions. For the most part, this means you need a tax planner.
An accountant who understands the need for planning, not simply filing.
The right partner is knowledgeable and can prepare a feasible tax plan for your business, emphasizing “the right partner.”
This resource helps you understand:
- how tax preparation is different from tax planning
- Benefits of creating and executing a plan
- And why you do need a qualified tax partner
Tax Preparation vs. Tax Planning
Tax preparation and tax planning are two of the essential things small businesses owners looking to save on their annual tax bill should consider. That said, if you only hire a tax accountant to help you with tax preparation, you are likely missing out on significant savings that come from tax planning services.
However, to know how you can leverage these services, you need to distinguish them – tax preparation and tax planning are technically two different services.
Tax preparation service deals with filing tax returns, ensuring your tax reporting complies with federal and local tax laws.
On the other hand, professional tax planning services help you optimize your tax situations before reporting so that you can take advantage of all legitimate ways to save on taxes and minimize possible penalties. To ensure you benefit most without overspending on these services, you need to work with an accountant who offers both.
Unlike tax preparation, tax planning ensures everything is working — so you pay what you owe — nothing more, nothing less.
This process requires a CPA who can do both and will be a cost-effective option to help save on taxes and still be. However, before getting into why you need to work with a knowledgeable planner, let’s discuss the benefits of tax planning:
- Saves time and reduces errors: Having an effective tax plan from the word go can save you a lot of time throughout the year. Further, because tax planning involves gathering comprehensive data, researching, and analyzing, it will likely reduce many errors.
- Reduce your overall tax liability: The primary goal of planning is to help ensure you pay what you owe. If you pay too little, there’s a risk of an audit. On the other hand, spending too much is another potential risk to your bottom line and operating cash flow.
- Foster growth in the future: Tax planning aids informed business decisions in the long term. Preparing for major expenses, reducing costs that aren’t necessary or deductible, and maximizing potential credits and depreciation are all benefits of forward-thinking planning.
Tax planning focuses on maximizing savings on taxes, and nearly all small businesses can benefit from having a solid tax plan. Moreover, it is the way to scale up your business.
Benefits of Working with a Tax Planner
Taxes are undeniably complex, and the complexity increases if you own a business. In most cases, you will need help not only with tax preparation but also with tax planning. That’s when a qualified tax planner becomes handy.
Tax accountants are knowledgeable and have the skills needed to formulate a feasible tax plan. As such, working with one can help come up with a tax plan quickly and faster than you would when working alone. In the long run, planning saves time and frees you to focus on day-to-day business operations in the long term.
Professional tax accountants have a solid understanding of existing credits and all other considerations that create an environment for an optimal filing.Getting a tax plan in place is a critical step to gaining a competitive edge, reducing overall tax liability, and allocating more cash towards growing your business. Want to get your optimal plan together for this year while getting a jump on the years to come? Find out how Tiffany Phillips CPA can help you.