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5 Tax Planning Strategies for Professional Service Providers | The Balance Sheet Inc

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tax services, tax consultant, tax preparation servicesAs a professional service provider, applying effective tax strategies can help you meet your financial goals. While you may feel too busy with the demands of your practice, it’s crucial that you take the time to plan your tax strategy.

Here are 5 top tax planning strategies that will help you accomplish your business and financial goals this year:

1. Maximize your deductions

If you’re claiming itemized deductions, you may be able to take advantage of the Net Operating Loss Carryover, if available. Keep in mind that the Net Operating Loss Carryover must be clearly shown on prior income tax returns and financial statements. You can claim your Net Operating Loss Carryover within three years of from the year in which the loss was incurred.

2.Leverage your tax credits

Tax credits are for things like energy, offering medical insurance, and more.  To fully leverage your tax credits, you need a knowledgeable tax professional to let you know what credits apply to your business. Feel free to contact us, we’re eager to help.

Corporate income losses from prior years may be used as credits against your income tax due. Losses can either carry back 2 prior years or carry forward for 20 years. Consult with your tax professional on the best strategy for you.

3.Get Charitable

If you’ve made charitable contributions to accredited institutions, you may be able to deduct these fully. However, in order to claim your charitable contributions, you may have to provide a Certificate of Donation. Any time a donation is over $250 a statement is required.

4.Mind your excess income tax payments

If you’ve overpaid your income tax, you may be able to apply that tax credit to the following year or receive a refund. Keep in mind the option to carry over is irrevocable.

5.Track your unappropriated retained earnings

Unappropriated retained earnings refer to the net income that has not been allocated as income to its shareholders or officers. They are usually distributed as dividends and taxable at that time. Timing of distribution can affect your tax bill.

Are you wondering about the best planning tax strategies for professional service providers? Contact us for a free consultation at (561) 842-1304.

Sources:

“Tax planning strategies.” BusinessWorld. Accessed August 26, 2017. http://www.bworldonline.com/content.php?section=Economy&title=tax-planning-strategies&id= 127590.

Hananel, Eric. “Tax Planning Strategies for Individuals in 2017.” Investopedia. January 10, 2017. Accessed August 26, 2017. http://www.investopedia.com/articles/taxes/011017/top-tax-planning-strategies-2017.asp.

PricewaterhouseCoopers. “Personal financial services.” PwC. Accessed August 26, 2017. https://www.pwc.com/us/en/private-company-services/personal-financial-services.html.

 

 

5 Tax Accounting Tips To Prepare Your Business for Success

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Did you just start your own business? Are you wondering what the essentials are to prepare it for success? A large part of ensuring that your business thrives, is making sure that your business funds are properly tracked. This is also known as “tax accounting”, and constitutes the backbone of businesses of any size.

Here are five tax accounting tips to prepare your business:

1.Understand your business entity

As a business owner, you’re liable for a certain amount of tax, depending on your business structure. While you may not have to understand the ins and outs of your particular tax situation, you should have a basic understanding of it.

For instance, you may qualify for substantial tax savings as an S corporation. However, it may be harder to operate than a single member LLC, for example. As an LLC, you may have the option to change the way your business is taxed. Options like being taxed as a regular corporation or an S-corp. Knowing your business entity and the different tax breaks each can provide, has the potential to save you money. Always consult with a tax professional, which leads to our next item.

 2.Consider hiring a professional

 Preparing your business for taxes is a complex task. Consider hiring a professional to help you through this process. The point is not just to get your taxes filed or checking every deduction box.  You want to maximize your tax benefits for your type of business.

A tax professional can help you structure your business for the best tax advantages. He/she can also help you understand the specific IRS requirements for your type of business, so as to better manage your prospective tax liability. While a bookkeeper can help you set up a good record-keeping system, an accountant can handle your year-end tax planning.

3.Get familiar with the various methods of accounting

As a business owner, you must select the accounting method best suited to your type of business. The two methods that are generally used and accepted consist of accrual accounting and cash accounting.

While the accrual method depicts your current, real-time financial situation, the cash method reflects the actual money inflows and outflows occurring in your business. Be mindful of these as you set your business, and consider letting a professional help you determine the best choice.

Cash and accrual are your basic methods of accounting. There are other accounting methods depending on your industry.

 4. Understand what’s deductible in your business

It’s important to understand what is deductible and what is not in your business. This knowledge will help you substantially save on your tax liability.

You can deduct a number of other costs and expenses in your business, including startup costs, education expenses, auto deductions. Equipment, entertainment, travel, and software expenses are also deductible.

5. Track your expenses accurately

Having a complete and accurate record of your expenses is crucial in order to take advantage of any tax deductions. This also means keeping a detailed record of your business transactions, including your mileage log as well as expense receipts. You’ll also need to carefully separate your personal from your business expenses.

It is best to get good bookkeeping software and enlist a professional to set it up for you. That way, using it is user-friendly and built around your needs.

Are you wondering how to apply these bookkeeping tips to your business?

Contact us for a free consultation at (561) 842-1304.

 Sources:

  1. Anon, (2017). [online] Available at: http://www.jelfsmallbusiness.co.uk/media/178275/Tax-Guides-for-Small-Businesses-V04.pdf [Accessed 10 Aug. 2017].
  2. Anon, (2017). [online] Available at: https://www.irs.gov/pub/irs-pdf/p334.pdf [Accessed 10 Aug. 2017].
  3. Staff, I. (2017). Tax Accounting. [online] Investopedia. Available at: http://www.investopedia.com/terms/t/tax-accounting.asp [Accessed 10 Aug. 2017].
  4. co.uk. (2017). Small business tax and accounting guides. [online] Available at: http://www.bytestart.co.uk/section/tax [Accessed 10 Aug. 2017].
  5. Google Books. (2017). K. Lasser’s Small Business Taxes 2017. [online] Available at: https://books.google.com.ph/books?id=o3kxDQAAQBAJ&printsec=frontcover&source=gbs_at b#v=onepage&q&f=false [Accessed 10 Aug. 2017].