Maximizing after-tax income by taking advantage of all the deductions, credits, and deferrals provided in the Tax Code makes other financial goals more accessible. But, this requires good tax planning. In the following lines, we compile the best practices in the industry to achieve it.
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The keys to good tax planning
Good tax planning depends on the experience and training of the professional who is responsible for carrying it out, although you can always improve by applying the following rules.
You need to remember that Small business taxes are a year-round exercise. A good tax planning is similar to maintaining a home. Proper diligence keeps repairs small, minimizes damage, and ensures that no major rebuild is needed. Taking advantage of quarterly tax payment options can be a good way to review assets and the impact of each asset on gross profit.
Keep good records
Proper documentation is essential for the correct analysis and calculation of taxes. In the middle of the digital era, good tax planning requires adequate support and automation. It can be dangerous to trust memory or manage receipts that are filed on different shelves in the office. The monthly account statements must be filed for easy retrieval and safe storage, not only to be able to plan, but also to respond to the requirements of the Tax Authority, if they arise.
Report all income
Carelessness, lack of diligence, or third-party mistakes can lead the business to forget to report income. Legally, it could be viewed as an attempted tax evasion and have serious business consequences. Therefore, in case of involuntarily omitting the income in a return from previous years, it is convenient to file an amended return as soon as possible and improve the filing and management system, so that it does not happen again and avoid fines and penalties.
Maximize personal deductions
The law includes different deduction possibilities related to state and local taxes, mortgage interest, charitable donations, property taxes and other expenses that can always be taken into account in good financial planning. Information is power and, the more aware of the laws in force, the greater possibilities exist of being able to take advantage of a deduction and not lose the opportunity to save.
Finally, in all good tax planning, it is necessary to take into account the terms in which refunds can be obtained in favor. In order to postpone expenses and accelerate income, you will always have to be aware of the conditions that are negotiated for asset purchases and sales, especially in cases where they are variable and change from year to year.
Although such management can add some complexity to management, the results of good planning will soon begin to show.