Tax planning is very important.
Are you considering making a small business investment this year or next?
If you pursue a new opportunity WITHOUT proper tax planning, there could be negative consequences from a tax perspective.
The tax structure is important because it dictates how business income is taxed, who is liable for the tax and how much tax is levied.
But the tax structure goes deeper than that. It also determines:
- How profits and losses are allocated
- How ownership is transferred
- How the entity’s liabilities impact you
Tax planning goes beyond just tax prep — it optimizes your life and business so you can pay less in taxes.
As you begin to tax plan, you need to first have a grasp on two basic terms.
- Tax deductions: This is what you can subtract from your taxable income. As you look over specific expenses you incur throughout the year, they may be deductible and can reduce the amount of income subject to taxes.
- Tax credits: This is what can directly lower your taxes. A tax credit of $2,000 lowers your tax bill by $2,000.
Tax planning involves arranging your finances in order to maximize tax credits and tax deductions while legally reducing tax liabilities. This also involves considering the timing of income and purchases.
Of course, these are just the basics.
At Roper Accounting Group, we are here to help you navigate these tax changes for your individual/personal, individual schedule C or for your small business including S corp, C corp and partnerships taxes.