Numerous entrepreneurs disregard tax planning and it’s the last thing on their mind until their Taxes are due. Tax planning is a continuous cycle and good tax consulting advice is a valuable asset. It is advantageous to you to review your income and expenses month to month and meet with your CPA or Tax Advisor quarterly to analyze how you can comply with the arrangements, credits, and deduction that are lawfully accessible to you.
In spite of the fact that tax avoidance is lawful, tax evasion – the reduction of tax deception, or concealment – isn’t. Often what sets tax evasion separated from tax avoidance is the IRS’s finding that there was fraudulent intent on the part of the business owner. The following are four of the areas the IRS examiners commonly focus on as pointing to possible fraud:
- Inability to report huge amounts of income , for example, an investor’s inability to report profits and dividends or a storekeeper’s inability to report a portion of the everyday business receipts.
- Claims for a fraudulent or incorrect deduction on a return such as sales rep’s overstatement of travel expenses or a taxpayer’s claim of a huge deduction for charity donations when no such expense occurred.
- Accounting inconsistencies, for example, a business’ inability to keep satisfactory records or a disparity between sums gave an account of a company’s profit and sums detailed for its financial statements
- Inappropriate allocation of income to a taxpayer who is in a lower tax bracket. Cases where a corporation makes contributions to the shareholder’s children
Tax Planning Strategies
There are infinite tax planning strategies available to Small and medium business owners. Some are aimed at the owner’s personal tax situation and some strategies target the business itself. Regardless of how simple or complicated a tax strategy is, is will e based off structuring the strategy to accomplish your goals.
- Reducing the amount of taxable income
- Lowering your tax rate
- Controlling the time when the tax must be paid
- Claiming any available tax credits
- Controlling the effects of the Alternative Minimum Tax
So as to plan ahead of time, you’ll have to assess your own and business income for thenext few yesrs. This is vital on the grounds that many tax planning strategies willsave tax money at one income level, but would make a bigger expense bill at other income levels. You will need to abstain from having the “right” charge plan made “wrong” by mistaken pay projections. When you realize what your rough pay will be, you can make the following stride: assessing your tax bracket.
Maximizing Business Entertainment Expenses
Business entertainment expenses are legitimate deductions that can lower your tax bill and save you money, provided you follow certain guidelines.
In order to qualify as a deduction, a business deal must be discussed before, during, or after the meal and the surroundings must be conducive to a business discussion. For instance, a small, quiet restaurant would be an ideal location for a business dinner. A nightclub would not. Take note of locations that include ongoing shows or distracting events that inhibit business discussions. Prime distractions are theater locations, ski trips, golf courses, and sports events
Business Automobile Deductions
If you use your vehicle for business meetings such as visiting clients or driving to business meetings, you may be able to qualify certain deductions for the cost of operating and maintaining your vehicle. You can deduct car expenses under the Income Tax Act or because, generally, they are not incurred wholly and exclusively to generate business income.