Posted on: 4 November 2015Share
Tax planning is a fairly lofty goal. It means not only getting your taxes turned in on time but actually thinking about them months in advance and taking steps to minimize the taxes you'll have to pay and maximize the deductions you'll cash in on. You may cringe at the idea of planning so far ahead when you're struggling to stay on top of your hectic schedule as it is, but all you really have to do to take advantage of this possibility is to follow a few simple steps. Set up automated reminders so you won't forget, and follow these four steps to getting the most of your tax planning potential.
1. Keep your records thoroughly updated and well-organized
Records are one of the most vital and least exciting parts of your business. Updating records regularly is a must, and the more frequently you update, the better. This is because you'll be able to remember details of each entry better if you don't wait too long before entering it. And when you add an entry, you should always include annotations of relevant details to help you remember the circumstances later. In addition, you should single out expenditures that may be eligible for tax deductions by marking them in some way (such as by highlighting the entry) so you can find them easily later.
2. Evaluate your accounting system
A good accounting system for a small business should have features to make tax planning easier. If you're just using spreadsheets and doing all the work yourself, you're missing out. That system may work okay for a very small business, but an accounting program that can create balance sheets and profit and loss sheets is more valuable for your business's finances.
3. Stay on top of tax amounts and credits
Occasionally, tax amounts will change, or new tax deductibles will be announced. You can keep an eye on IRS Guidance for changes that could affect your business. Then plan for next year's taxes with these changes in mind.
4. Find a CPA
If you keep careful records throughout the year and stay on top of planning, your taxes at tax time won't take very long to prepare. You may be able to just hand everything over to your tax preparer and not have to spend much time explaining or going over numbers and so on. However, you'll need to be careful to hire a reliable professional. One way to do this is to choose a CPA (certified public accountant). You may have to sift through a lot of search results, so do this research ahead of time.
By using these four tips for planning throughout the year, you can ensure that your tax preparation goes smoothly and that you're on top of your game and ready for whatever tax season throws your way.