Why Tax Planning Should Be a Year-Round Activity
Most small business owners will want to avoid having to pay more in taxes than they need to. While this may seem to be common fiscal sense, some people do not take tax planning as seriously as they should and may be missing out on many opportunities. What are some factors to take into account as you plan for the new tax year ahead?
Tax planning is not a one-time exercise, nor should you treat it as seasonal. In fact, you should work with your accountant to review your tax situation throughout the year so that you can make any necessary alterations on the fly. After all, if you suddenly realise that you could have saved some tax if you had made earlier provisions, it may be too late (or simply not possible) to adjust an end of year return.
Most business owners do not keep up with changes in the tax code, either. They may not be aware that the government has altered the rules relating to writing off assets and depreciation, changing some of the trigger thresholds and bringing in businesses that may have a lower turnover. This is one example of how changes in tax law could result in a net tax saving for certain businesses, but only in that particular tax year.
Apart from any one-off situations, it's good to review income and expenditure to ensure that the records are contained within the correct tax year. For example, it is sometimes possible to carry income forward from one tax year into another, based on the revenue type and the associated contract of sale. This means that you could avoid paying the associated tax on the transaction in the current fiscal year, which could significantly affect cash flow.
It may also be possible to deduct an amount for expenses before the tax deadline rather than after. Careful attention will need to be given here to make sure that this is allowable under the tax rules, but once again, this type of action could reduce the tax bill in the short term.
These are just a few areas to look at as part of an overall approach to tax planning. It is always best to work with an experienced accountant who will advise about best practices and keep up with the latest rules and regulations.
For more information, contact local accounting services.