A few easy Tax Planning ideas for the small business owner
Written on February 23, 2010 by admin
For many small business owners, one of the largest overheads is their tax charge. Business owners have always had options to lessen their tax bill, lawfully. The focus has typically been on entrepreneurs to “locate” an accountant who is keen to assist them. Until they did, they were often unaware of what “wise” entrepreneurs have been deducting for many years.
Every day, I see entrepreneurs who squander massive time, effort and capital setting up and developing their companies but then put under pressure with poor cashflows. When they do ultimately earn a profit and have cash in the bank, the prize for the achievement is a tax demand! Similar to you, I value my day as being precious and I don’t like the thought of working any more days than I need to, merely to compensate the tax office. Clearly imagine how many weeks you go to work every year solely to pay your tax demand! Just imagine how many “extra” days you’d have if you didn’t pay as much tax.
Time and time again, I have seen too many people pay too much tax because of little information and trepidation from the tax department.
How often have you argued over whose shout it is at the bar; or that the check out person at your supermarket has short-changed you? Yet amazingly, countless small business owners aren’t willing to set aside any time to understand how to slash their tax charge.
As a chartered certified accountant who has worked in the UK, Europe and now New Zealand, I have been honoured to become involved with many small business owners. However, many of them have never had the faith to pose tough questions to their accountants and have never challenged the “status quo”. That’s a shame as so many have taken risks, worked extremely hard and made countless sacrifices along the way with little reward…Just visualize what an additional few thousand dollars will buy you, if it didn’t go the tax man!
Very recently, I had a talk with a very upset ex-small business owner (who was not one of our clients) who told me she’d recently gone out of business. As we discussed her company in more detail, it became noticeable that she hadn’t claimed many of the expenses that successful business owners claim.
Tax laws changes regularly and all business owners should engage an accountant. Whilst many small business owners try to organise their own tax returns and believe that they could save expert accounting & tax advisors fees, a good tax accountant ought save you money.
Tax planning can be segregated into 2 core types:
The 1st one involves identifying the effects of treating either an individual transaction or a group of comparable transactions; the second one is focused on reviewing the whole business structure, either when it’s being set up or at a later stage. Although, the same income tax legislation applies in these cases, tax planning steps for each will doubtless be different.
The conclusion of tax planning is by and large to either decrease or reduce (lawfully) the sum of tax payable and 2 key ways to achieve are allocating revenue to a taxpayer who will benefit from a smaller tax outcome and increasing the sum of taxable expenses you claim.
So, as this year’s income tax year looms, set aside some time to find an accountant who will answer the tough questions you pose them. Remember that you may be paying more tax than you need to!
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