Summer is in full swing now and. if you're a business owner with sales that are heating up, this is the perfect time to take stock of your business’ financial situation.
Mid-way through the year is the perfect opportunity to reflect and plan. Look back and assess how you are performing against the financial goals that you set in January? Look froward and address questions such as: Could you benefit from cutting costs somewhere, or increasing cash flow somewhere else?
Annual tax planning as part of your summertime schedule is sound business practice. Meeting with your CPA or bookkeeper for a mid-year review can be aid in small business growth, and planning now may help you reduce your tax expenses at the end of the year.
Be sure to address these 5 points during your mid-year review with your CPA.
Re-Consider Your Legal Classification
Businesses grow and evolve over the years. Small businesses generally grow faster than most because they have the freedom and agility to move into new markets and explore unique opportunities. If you started your company as a sole tradership or partnership as the beginning of the year, the developments you have seen since then could mean that your entity type no longer makes sense.
Meeting with your CPA will allow you to assess your current standing and determine whether a change in entity is right for you. Making a switch now could save you thousands when it is time to send in your tax reports.
Evaluate Your Recordkeeping
Recordkeeping can be particularly tricky for smaller companies. If you are a business owner running a start-up, you are likely responsible for wearing many corporate hats. With so many responsibilities to manage, things like accounts and receipts can easily slip through the cracks.
To make the most of your tax deductions and reduce your risk of triggering an IRS audit, you need to maintain clear and reliable records. If your records are not up to date, or you are missing something essential, now is the time to fix it — long before you need to correspond with IRS. Getting help from your CPA means that you can continue to focus on business growth, while they handle the number headaches.
Plan Your Investments
There are certain deductions a Small Business Owner can consider, particularly in your first year of operation. If it seems like this year is going well, think about where you can invest in your future. For example, you might want to:
- Buy new equipment. Stocking up on valuable equipment will help to future-proof your company and make your business run efficiently.
- Hire employees or independent contractors. Perhaps now is the perfect time to get some help running your company. Choose people who will add value to your organization, and be careful to classify them correctly to avoid any legal trouble on future tax returns.
- Expand your R&D. No matter your industry, speak to your CPA or bookkeeper about investing in research and development for your organization.
Think About Your Future
When you are in the midst of running an exciting, high-growth small business, it is easy to get caught up in the here and now. You are busy trying to make sure that your organization continues to prosper, but do not forget to think about your future
If your company is turning a profit and you want to invest in your future, now is the perfect time to set up a retirement plan. Contributing to a new savings account for your retirement will help you to reduce your taxable income and give you a nest egg to rely on in the future. The contribution limits and specific rules can vary, so make sure you get guidance from your CPA.
Review Your Potential Tax Payments
Now is the time to start thinking about taxes. Take a look at how much money your company has made thus far and assess your estimated tax payments to make sure that you are not underpaying. Getting ahead of your tax requirements now will stop you from facing surprises when tax season arrives.
The more you start saving now, the better prepared you will be for the remainder of the year. If you are concerned that you may not be able to afford your tax burden for the upcoming tax season, or if you need legal tax advice, contact the expert tax attorneys at Milikowsky Tax Law today.
The information contained on our website and in blogs is provided for information purposes only and does not constitute legal advice.