Corporate tax planning is not an option, it is a must

Corporate tax planning is necessary for any company to meet its obligations to the government, increase profits and plan by analyzing the performance of previous years. An experienced tax accountant can guide a business through the maze of tax laws, advise on debt reduction strategies, and help put more money into growth and development.

taxes are unavoidable

It is impossible to avoid paying taxes in business. Every time a product or service is made or sold, the business has to pay taxes on a portion of its profits. Taxes allow the government to provide services and protection to its citizens. However, a business can lower its taxes and increase its working capital with tax planning. A business can grow and become more profitable with more working capital. The business accountant should discuss what types of deductions and write-offs are right for the business at the right times.

Two Basic Rules of Corporate Tax Planning

There are two key rules in tax planning for small businesses. The first is that the company does not have to incur extra expenses to obtain a tax deduction. Waiting until the end of the year to purchase major equipment is a smart tax planning method, but a business should only use this strategy if the equipment is necessary. The second rule is that taxes should be deferred as much as possible. Deferring taxes means legally putting them off until the next filing season. This frees up money that would have been used to pay that year’s taxes for interest-free use.

accounting methods

A company’s accounting methods can influence its taxes and cash flow. There are two main methods of accounting, the cash and the accrual methods. Under the cash method, revenue is recorded when it is actually received. This means that it is recorded when an invoice is Really paid out instead of when it is shipped. The cash method may defer taxes by delaying billing. The accrual method is more complex because it recognizes income and debts when it really happens rather than when the payment is made or received. It is a better way to chart the long-term performance of a company.

Fiscal Planning with Control and Valuation of Inventories

Proper control of inventory costs can positively affect a company’s tax deductions. A tax planning accountant can advise how and when to purchase inventory to take full advantage of deductions and changes in inventory value (valuation). There are two main methods of inventory valuation: first-in, first-out (FIFO) and last-in, first-out (LIFO). FIFO is best in times of deflation and in industries where a product’s value can drop sharply, such as in high-tech areas. LIFO is better in times of rising costs, because it gives inventory in stock a lower value than the prices of goods already sold.

Predict the future by looking at the past

Good tax planning means that a business takes into account past sales performance of its products and/or services. In addition, the state of the economy in general, cash flow, general costs and any corporate changes must be considered. By looking at previous years according to the “big picture,” executives can forecast the future. Knowing that an expansion or reduction will be needed makes planning easier. The company may stagger expenses, purchases, headcount reductions, research and development, and advertising as needed.

A tax planning accountant can help a business increase profits, lower taxes, and achieve growth for the future. Discuss your company’s needs, wants, strengths, weaknesses and goals with your corporate accountant to develop a tax planning strategy for all of these factors.