Business tax planning is essential for all companies, regardless of their size or industry. When done right, it can offer several benefits, including a clearer understanding of your firm’s tax liabilities, the opportunity to take advantage of deductions and credits, and a reduced risk of errors and audits.
Business leaders and their accountants can support effective tax planning and minimize the company’s tax burden by asking the right questions. Some of the most important questions to answer during tax planning include:
What Is the Company’s Current Tax Situation?
The answer to this question will comprise an overview of your company’s taxable income, expenses, and current tax liabilities. It’s also important to identify any recent changes in your business, such as a new product line or an acquisition, in order to assess their impact on the company’s tax position.
What Are the Company’s Future Plans?
Your company’s long-term goals and strategies play an important role in tax planning. You should identify upcoming changes or expansions to your business, including new locations or products, and how they relate to the current and upcoming tax regulations. You and your tax accountant should also consider the potential impacts of current market trends, such as the rise of online shopping, and the tax benefits or challenges these trends present.
Which Tax Breaks or Incentives Are Available to Us?
During tax planning, your accountant will help you understand the available tax breaks and incentives to reduce your tax liability. This includes deductions, credits, and exemptions specific to your company’s industry or location.
What Are the Pros and Cons of Various Tax Strategies?
When tax planning, it’s important to consider both the risks and rewards of any proposed strategy. This includes evaluating the potential savings, as well as the potential for penalties and audits. You should also consider how each tax strategy will impact your bottom line.
When Is the Best Time to Make Big Purchases?
Another matter to consider during tax planning is the best timing for large purchases. For example, businesses may want to delay major purchases until after the end of the year, when they can take advantage of any available tax breaks.
Are There Any Tax Deductions We Are Forgetting?
Forgetting to claim a tax deduction can be costly for your business. An experienced accountant can review your company’s finances and identify any potential deductions you may have overlooked.
Can Changing Our Business Structure Provide Tax Benefits?
If you’re considering a change in business structure, such as a merger or an acquisition, it’s crucial to evaluate the potential tax benefits of the move. This includes understanding how the change will impact the entity’s taxable income and liabilities.
The Takeaway
When it comes to business tax planning, there are a number of important questions to ask your tax expert. By painting a full picture of your company’s financial position, you will be in a better position to make strategic decisions regarding your taxes, as well as your business operations.