Corporate tax planning is not an option, it is a must

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Corporate tax planning is necessary for any company to meet its obligations to the government, increase its profits and plan by analyzing the performance of previous years. An experienced tax accountant can guide a business through the maze of tax laws, advise on debt reduction strategies, and help invest more money in growth and development.

taxes are unavoidable

It is impossible to avoid paying taxes in business. Every time a product or service is made or sold, the company has to pay taxes on a portion of its profits. Taxes allow the government to provide services and protection to its citizens. However, a company can reduce its taxes and increase its working capital with tax planning. A business can grow and become more profitable with more working capital. The business accountant should discuss what types of deductions and write-offs are appropriate for the business at the appropriate times.

Two Basic Rules of Corporate Tax Planning

There are two key rules in tax planning for small businesses. The first is that the company should not assume extra expenses to obtain a tax deduction. A smart tax planning method is to wait until the end of the year to purchase major equipment, but a business should only use this strategy if the equipment is necessary. The second rule is that taxes should be deferred as long as possible. Deferring taxes means legally postponing them until the next tax season. This frees up money that would have been used to pay taxes for that year for interest-free use.

accounting methods

A company’s accounting methods can influence its taxes and cash flow. There are two main methods of accounting, the cash and the accrual methods. Under the cash method, revenue is recorded when it is actually received. This means that it is noted when an invoice is Really paid out instead of when it is sent. The cash method can defer taxes by delaying billing. The accrual method is more complex because it recognizes income and debts when really happens rather than when the payment is made or received. It is a better way to chart the long-term performance of a company.

Tax Planning with Control and Valuation of Inventories

Proper control of inventory costs can positively affect a company’s tax deductions. A tax planning accountant can advise how and when to purchase inventory to take full advantage of deductions and changes in inventory value (appraisal). There are two main methods of inventory valuation: first in, first out (FIFO) and last in, first out (LIFO). FIFO is best in times of deflation and in industries where the value of a product can drop sharply, such as high-tech areas. LIFO is best in times of rising costs, because it gives in-stock inventory a lower value than the prices of goods already sold.

Predict the future by looking at the past

Good tax planning means that a company takes into account the past performance of the sales of its products and/or services. In addition, the state of the overall economy, cash flow, overhead costs, and any corporate changes must be considered. By looking at past years against the “big picture,” executives can forecast the future. Knowing that an expansion or reduction will be needed makes planning easier. The company may stagger spending, purchasing, downsizing, research and development, and advertising as needed.

A tax planning accountant can help a business increase profits, reduce taxes, and achieve growth for the future. Discuss your company’s needs, wants, strengths, weaknesses and goals with your corporate accountant to develop a tax planning strategy for all of these factors.

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