As a small business owner, you know that tax season is here. As a smart business owner, you know it's always better to have a plan. So what's your tax plan this year? Or next?
Here's why tax planning is so important for small businesses, and a few items to add to your small business's tax plan.
Needing a Tax Plan
Getting a small business off the ground takes a lot of time and planning. Hopefully part of that plan included setting your business up to be ready for tax season. Given all the effort you've put in to contemplating your supply chain, cultivating a customer base, calculating profits and losses, it would be crazy not to consider how your corporate taxes will affect your bottom line.
Lowering your business's tax rate to reduce the amount of taxable income, taking advantage of small business tax credits, and having the right corporate structure can all effect how much you'll pay in taxes and your annual outlook for next year.
Creating a Tax Plan
Regardless of what you do or sell, you need to know when your taxes are due, and that could depend on your corporate structure. LLCs must file by March 15, and sole proprietors and single-member LLCs must file by April 15. Your corporate structure will also affect your filing forms. LLCs use a form 1120 or 1120s, partnerships use form 1065, and sole proprietors and those who are self-employed use s Schedule C.
You also need to know any and all tax credits and deductions that can pay off for your small business. Certain hires, physical improvements to business structures, and employee benefits can earn tax credits for your small business, and the amount and variety of tax deductions is always expanding. Knowing your credits and deductions can even help pay estimated taxes, which can reduce your overall tax hit at the end of the year.
Unless you're the only employee at your small business, you'll have to plan for your staff's tax implications. You'll need to know how federal income tax to withhold, how to classify employees and independent contractors, and how your contributions to employee benefit and retirement packages are taxed.
If you're going into tax season without a plan, you might want to create one with an experienced tax lawyer near you.