The tax code has plenty of sections that business owners can use to lower the amount of taxes they have to pay. The trick to unlocking these secrets is proactive tax planning.
Business owners, like other busy taxpayers, engage in what you might call “reactive tax planning”. They do not communicate with their CPA throughout the year and when they do, the focus is on figuring out how much tax they are going to owe and not on keeping more of what they make.
With this approach, you typically wind up overpaying your taxes and keeping less of what you make. This leads to most business owners missing out on the big opportunities that lead to significant savings.
Finding these opportunities requires training as a tax professional, but also requires taking the extra time to identify opportunities. Working and communicating with your CPA allows you to:
- Learn how taxes can be used in your favor
- Monitor changes that could improve your tax situation
- Document those changes so you can collect the savings
The process of proactively isn’t complicated or time-consuming. In fact, you could get started with a new perspective in 5 basic steps.
Those basic steps are:
Talk to a tax expert throughout the year
As discussed above, many taxpayers only visit a tax professional one time a year,
unless they are in trouble. This needs to change. If you’re going to be proactive about
your taxes, you will probably need an experienced professional who can help you
identify opportunities to save on your taxes
Understand your tax opportunities
Even if most people don’t know what tax terms like “deduction” and “credit” mean, they
do know that it means paying less taxes. Understanding these tax terms, though, can
boost your future tax savings. Get acquainted with these basic tax term
Be on alert for situations that will affect your tax situation
Ask the right questions
Put your tax-planning strategy on auto-pilot
The final step in making your taxes less taxing is making the process automatic.
Taking the time to get proactive about your taxes pays off by letting you keep more of what you make!