DGC provides you with critical updates and PPP Loan resources to guide you during this challenging time. Click here to visit our dedicated COVID-19 page.
If you were driving to a place you had never been before, you would probably use your GPS. You would not get behind the wheel and start driving without knowing the best route.
You would want to have a plan.
Now is the time to begin the tax planning process. It’s one of the most valuable ways you can minimize risk and maximize opportunities for you and your business. The following are some questions that should be considered during the tax planning process.
Business Tax Planning
Franchise owners first need to dig deeper into their year-to-date results and thoroughly evaluate where they stand. Are your transactions properly classified and are there any significant transactions that could happen between now and the end of the year? Have you had any equipment purchases? Do you have a line of credit or a bank note that is coming due? It’s also essential to set both long-term and short-term goals. These goals will impact how your tax plan will be structured. For instance, many businesses are looking to minimize taxable income. However, what if you would like to continue to fund the growth of your business and add to your working capital? There could be significant tax consequences if you choose to go that route, and tax planning can help minimize your liability.
Individual Tax Planning
An analysis of year-to-date income and deductions is the initial step to gaining a more accurate understanding of the information that you will eventually submit to the IRS. Have you factored in any bonuses? Have you been paying enough in taxes so far this year and, in turn, could you be facing underpayment penalties? Should you make estimated tax payments? Is it worth looking into deferring income, if possible?
Tying Business and Individual Together
There are certain pass-through provisions for S Corporations, LLCs, and Partnerships that allow taxpayers to tie their individual tax returns to their business activities. Income from the business is passed through to the individual, reported on their individual tax return, and the tax is paid at the individual level. There are many advantages to this structure, however business and individual tax information needs to be examined together in order to gain an accurate assessment and to maximize tax planning opportunities.
Do you know what the tax impact will be for you and your business when it’s time to file your tax return? DGC’s Accounting & Business Advisory Services team has extensive experience working with franchise owners, and provides clients with tax, accounting, and bookkeeping support, as well as CFO/controller & business advisory services. Our experts can work with you to create efficient and proactive tax planning goals which will allow you to manage your tax liability and eliminate any surprises in April. Contact Daniel Gaudet, CPA at 781-937-5142 / firstname.lastname@example.org, Joseph Sabelli, CPA at 781-937-5740 / email@example.com or James Salerno, CPA at 781-937-5744 / firstname.lastname@example.org.
If you would like to get alerts and insights like this sent directly to your inbox, sign up here.