Monday February 3, 2014
Dear Clients and Friends,
Benjamin Franklin said "in this world nothing can be said to be certain, except death and taxes." That being said, it would truly prove useful if we become aware of some strategies that can soften that tax blow.
Tax avoidance is not synonymous to tax evasion. Tax avoidance is the practice of critically structuring your transactions to ensure that you have an efficient tax plan in place for your business. Even the courts agree that businessmen have the right to choose whatever course of action they see fit to legally lower their tax liability.
Tax evasion is a deceitful way of reducing your taxable income either by trickery or concealment, which makes it a crime. To make sure that you reap the rewards of the wise and legal strategy of tax avoidance, you need the services of competent tax experts who can thoroughly review your finances and provide you with accurate recommendations.
Tax planning such as any other type of planning requires a perception of things that may happen in the future; in this case, future earnings. Part of this forecasting should be the implementation of suggestions and strategies on how to reduce your taxes to the smallest legal amount possible.
Your bookkeeping services may recommend the following strategies:
- Lowering your taxable income
- Taking advantage of tax credits and deductions
- Carefully timing income and deductions
Make sure that you do not fall into the trap of saving dollars at one level while creating a bigger tax liability on other sources of income. Planning is like having a crystal ball that will allow you to maximize all profits while keeping tax obligations at a low.
Know Your Deductions
As a business owner, it can be quite easy to overlook some simple tax deductions that can severely lower your tax obligations. You may say that this is what your bookkeeping service or accountant is for. The reality is that every business owner must understand precisely what their bookkeeper or tax expert is doing to ensure that they are really reaping all the benefits.
Pay close attentions to the following tax deductibles to make sure that you or your bookkeeper did not overlook them.
- Business travel expenses
- Expenses for service vehicles
- Business representation, dining, and entertainment
- Office supplies and use of technology
- Cost of communication
Any tax planning would be virtually worthless if there is no money in your company's account. Every budget must be in place a year ahead and measured against the actuals of the year. Your tax expert accountant will play a huge role in ensuring that your business is not burning up while maximizing your credits and deductions. Your accountant can help ensure that profits are reinvested in the company to maintain its growth while deferring the tax burden until you are financially solid. Work closely with your bookkeeping service to show as little income as possible in any taxable year.
Feel free to contact our office if you require assistance in tax and accounting.