Now that you’ve completed and filed your business taxes for 2015, the last thing you might want to think about is preparing your business for tax season next year. However, now is a great time to plan ahead so that next spring is not only smooth but an opportunity for a larger financial benefit than your business might otherwise experience.
Here are a few tips for keeping organized this year while positioning your business to take advantage of opportunities in the tax code.
1) Meet with professionals that affect your company’s financial picture. While financial advisors and insurance brokers will defer to CPAs and tax attorneys about the detailed tax treatment of financial decisions, these specialists are often very well versed in regulations that affect the products they offer. Meeting with these advisors early in the year, while your company can still make changes to your plans, will better position your business for 2016 taxes. Potentially, changes to the retirement plan, insurance coverage, and other employee benefits your company offers will position it for favorable tax treatment.
In particular, make sure your company is up to speed on the requirements of the Affordable Care Act and the corporate healthcare deductions for which your company may be eligible.
2) Schedule a planning meeting with your CPA or tax attorney between now and the middle of the year. During this more “calm” season for these tax professionals, they are more able to spend time learning about your business objectives and helping you do true tax planning. You, your CFO, or other executive most in charge of making strategic financial decisions, should lead this conversation from your side.
It’s important to recognize that taxes are not just an expense, but are designed by federal, state, and local governments to steer business behavior in ways that lawmakers believe will benefit the economy. Review your primary business objectives, markets served, and products and services offered with your tax professional. There may be federal tax incentives or even state and local tax incentives available.
Does your company export products directly or through a U.S. based distributor? There may be tax incentives available. Do you plan to make any major investments or equipment purchases during the coming year? By planning ahead you may be able to adjust the accounting treatment of those investments to better fit into an overall tax plan. For example, in some cases, it may be to your business’s advantage to fully depreciate newly-acquired assets within this tax year (details section 179 of the tax code).
3) Get and stay organized this year. We cannot overstate the importance of keeping detailed and accurate records of expenses. Not only will audits go more smoothly, but you won’t leave money on the table by failing to account for legitimate business expenses. If your company deals with physical products and materials, don’t wait until the end of the year to do a physical inventory – do it periodically throughout the year.
Most importantly, meet those important tax deadlines in order to avoid penalties. For corporations, if you choose to file or pay your corporate taxes late, the IRS will fine you $195 per shareholder, per month. Even if your company does not owe any taxes, IRS Form 1120 must still be filed on time. This penalty accumulates month after month until the form is filed and any taxes due are paid. Because the penalty is per shareholder, the fines can get extreme for a corporation.
4) Talk with your attorney about your company structure. If you happen to run your business as a sole proprietorship, now may be the time to make a change. Businesses that file a Schedule C return are much more likely to be audited and may also be paying more in taxes than necessary.
Filing and paying taxes may feel like a burden that you would rather not deal with until you are forced to by filing and payment deadlines. This year, prepare your business for tax season by consulting with professionals and taking advantage of opportunities in the tax code. You might be surprised by what you gain.