The concept of “YEAR-END” or “tax planning” is significant whether you work as an income tax attorney, a high-net-worth client adviser, or any other type of individual who will be filing a business owner’s tax returns in the United States.
Depending on what the President decides to do, U.S. business owners can anticipate their corporation taxes in 2019 to range from 10 to 24 percent of their profits. Particularly the corporate community is very active in structuring and arranging their taxes for this year to lower their liabilities, which is advantageous for the American economy. The same holds true for individual tax returns filed in the United States, however, fewer Americans plan their returns because they can do so for nothing with the aid of tax return preparers.
You have a good business idea, your team is dedicated to the launch, and you need to prepare for tax season.
While there are numerous resources available to assist you in understanding the complexities of your company’s tax requirements at the federal, state, and local levels, you may not have the budget for a tax professional. This means that a quick Google search will reveal how to calculate basic tax rates.
The business side of tax preparation, however, is more nuanced and complex than even the most tech-savvy business owner can handle. Preparing tax returns or an accounting schedule daily is not the best use of a business owner’s time, let alone mental energy.
How do you start?
When tax planning is necessary, this is a point that is frequently asked. And tax planning is crucial for businesses because it guarantees that they adhere to the tax legislation and pay no more in taxes than is permitted by law.
Businesses choose to deal with this issue on their own rather than relying on accountants or other advisors for assistance with planning. In essence, any such planning will result in a reduction in the amount of taxes owed. The decision is about maximizing the tax benefits available to the business, which may result in a lower tax bill as a result of the planning.
Start by building a personal budget
Looking at your finances and considering your expenses is one of the simplest ways to start your tax planning process. The first step is to create a personal spending chart. We recommend that you divide your expenses into three categories: expenses that are constant regardless of your situation, such as rent, insurance, and utilities; and expenses that vary with your income, such as groceries and other purchases.
Make a net worth calculation. Add up everything you own — from your stuff to your car and your home. This includes your bank balances, any money you’ve saved, any gift cards you have, money owed for anything you need or want, and any money you owe. That’s probably not much, because most people only have checking accounts, not savings accounts.
Collect Tax Information on Everyone
It’s a good idea to inform your board of your need and the steps you’ll be taking to determine who needs to be paid at the next board meeting. Ascertain that you have adequate data for each of your major players. If it isn’t there already, get it – and plan to present it in the future.
Understand How Business Income Is Taxed
Because the United States has a federal government, all taxes are decided at the federal level. Furthermore, individual states have the option of assessing and taxing their income tax, including taxes added to the cost of doing business. State and local taxes, also known as the “mill rate” of a municipality, add 5%, while the federal rate is 16%. The total of these is 20%, which is why state and local taxes are included in the total of your taxes.
Preparing Your Financial Statements
The timeframe for filing business tax returns is determined by the size of the company.
Small businesses with annual sales of less than $10 million must file a tax return by the 15th of August if their income is $2.2 million or less, or the 15th of February if it is more. Businesses with taxable years beginning after March 2007 can file their returns electronically. Small businesses that earn more than $10 million in a year must file a late return by the 15th of the following month.
However, if you can demonstrate that you were unable to file electronically due to IT issues, the IRS will automatically grant you a 70-day extension. You should fax proof to the IRS or obtain an email receipt from the IT supplier as proof.
For the majority of people, the due date is the same.
All SMEs should review their year-to-date tax preparation in the run-up to the new year. New tax laws must be followed as well as brand-new options for saving.
It’s crucial to know what you can deduct from your business income tax and to choose the accounting and tax strategy that will benefit your company the best in order to maximize your tax benefits.
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