Taking a yearlong view to planning your business and personal taxes is a great strategic approach. While many business owners will quickly agree, because of the daily grind, this is sometimes left for the last minute. As you consider Q4 projections for your business, now’s a great time to revisit your tax planning for a predictable finish to 2017. Here are 5 key tax strategies that can save your bottom line:
1. Request an S-Corp election for an LLC you set up this year. – If you’ve previously paid a lot in self-employment tax and had an LLC (sometimes a major mistake by other planners), you can easily still elect to be taxed as an S-corporation, retroactively, to January 1, 2017. It’s simple and affordable to file the proper paperwork. There are new IRS regulations that allow for this retroactive classification at year’s end. However, don’t forget to do your payroll. You are required to take some payroll for yourself out of the company if you make the election.
2. Set your payroll amount. – S-Corporation owners or newly elected LLC S-Corps must complete their payroll before year’s end. Many business owners tend to wait until the fourth quarter to do this, which is not a good idea and can be a flag for a potential IRS audit. If you’ve already done your quarterly payroll throughout the year, this can be a great time to adjust it to the proper amount . . . maybe increase it or lower it, based on your net-income.
3. Push income or expenses to the proper year. – This is a standard strategy, but a tricky one, with higher tax rates. Typically, you want to push income to the next year and accelerate expenses to the present year. However, when you’re spreading out income between this year and the next, try to stay under certain higher marginal tax brackets.
4. Adjust estimated taxes based on financial data from the first three quarters. – Calculating your quarterly estimated tax obligation is probably one of your more challenging accounting chores. Have you developed a good system for coming up with that every-three-month figure, or are you regularly—unpleasantly—surprised at tax preparation time? Unless you’re in a seasonal business where fall and winter are your heaviest selling seasons by far, you should be able to create some projections for the 4th quarter now based on reports from January-September 2017. This will give you some time to do any adjusting necessary.
5. Did you or your company go through any major changes in 2016 (opened a home office, hired staff, sold residential property, had a child, etc.)? – Any changes in the basic structure of your family or business is likely to have impact on your income taxes that you may not anticipate. Get in touch with your tax advisor to discuss these significant changes.
Should you consider any or all of these strategies, it is imperative to have a decent set of books so you can make informed and accurate decisions. One of the best year-end strategies you can implement is just getting your bookkeeping in order to start the year off making better management and economic decisions for your business. Also, having monthly financials will keep you ahead of the game, and greatly facilitate the tax planning process.
Email me at DanYoung@b2bcfo.com if you need assistance with Q4 planning or Take the Free 15-minute Assessment.
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