TAX ACCOUNTANTS PROACTIVE BUSINESS DECISIONS 2018
Tax season can be one of the most stressful times of the year for many small business owners. This is largely because they tend to wait until the last minute instead of tending to taxes throughout the year. Although the many changes to the tax code for 2018 are intended to make taxes “easier”, it still presents itself as a completely foreign language without the aid of tax accountants. This perceived complexity can easily translate to missing out on some low hanging fruit i.e. tax savings. There are several savings tips to consider for 2018.
- Keeping good accounting records – Although this may seem like an obvious thing to do, a few months of lazy record keeping can inadvertently end up as a higher tax liability when it comes time to file. Keep accurate records through the year so at the end of the year, you are able make informed tax management decisions that result in a smaller tax liability. To make sure your financial information is correct, reconcile all your bank and credit cards each month, and have trusted tax accountants help you through the year to minimize surprises when filing.
- Forecasting a business cashflow – Creating a cash flow forecast gives you the chance to estimate your tax impact and prepare for your payments and deductions. While modelling out the flow of your receivables and payables in conjunction with your budget and sales will certainly help you at tax time, forecasting all those key factors in your cash flow will also help you thrive and grow your business year after year.
- Correctly classify those who do work for your business – Employees or Independent Contractors? While it is tempting to classify an employee as an independent contractor because of the cost savings, it might not be the best idea for your business. There are very strict rules surrounding proper classification of a worker and steep penalties for failure to correctly follow the law. On the other hand, if you wrongly classify independent contractors as employees, you may very well end up paying higher taxes.
- Take the Section 179 Deduction – The Section 179 of the IRS tax code allows businesses to deduct the full purchase price of software and/or equipment purchased or financed during that tax year. Many small businesses are unaware of this deduction and do not use the available accelerated depreciation. It’s important to take advantage of this deduction especially when buying or financing equipment because the deduction is essentially “use it or lose it”. And to top it all off, the deduction for 2018 has doubled to $1million from 2017’s allowed $500k.
It is important to note that making too many business decisions solely based on the tax impact is never a good idea. Still, when owning a business, tax planning and preparation should be an absolute priority. Filing for taxes typically causes a lot of headaches if your books are not clean, your source documents are unorganized, and your tax money is all but enough. However, hiring tax accountants to help manage and explain these activities can greatly increase your chances of focusing on doing what you love, and that is running your business.
Ricky M Hackler