Year End Tax Planning

Business Management, Taxes, Business Smarts
by John Larson

Often times, as tax practitioners, we file a tax return in March or April and the client owes some money. Maybe a little more money than they had in mind. This is a situation no one wants to be in – including the tax preparer. If you own a small business this can be a common situation due to the fluctuations of profit that a business can have year over year.

At Blueback Accounting, we prefer to be the bookkeeper for our small business clients; being involved on a month to month basis enables us to recognize opportunities to talk with clients about the tax outlook throughout the year. However, we understand that hiring a bookkeeper isn’t a viable option for everyone so we also recommend our tax planning services during the year. At no time is this more important than at the end of the year. For those clients who don’t want quarterly tax planning, we set them up with quarterly, estimated ‘safe harbor’ tax payments, but we always take a detailed look at year end to make up for any shortfall, or for that matter, any overage. There is no sense in over paying your tax liability to the government only to wait to get it back months later.

If we have the opportunity to look at your tax situation in November or December it provides you the opportunity to plan accordingly. Maybe we can save you some taxes; maybe you have options you weren’t aware of. At the very least, if you are going to owe, this gives you time to plan for the liability so that you aren’t creating a cash flow crunch for your business. More than that, it also gives us time to make decisions before year end; if a positive option is available to you, we can act on it in the current tax year. Do you need new machinery that will create a tax deduction or do you want to invest in a retirement plan to defer some income and tax?

Unfortunately, these are all too often decisions that cannot be made retroactively. Once the tax year is over you are stuck with what you have. We have never met anybody who enjoys paying taxes, so do yourself a favor and be proactive with your tax planning so that you can make decisions that not only decrease your tax liability but also help you and your business grow in a positive direction.