It is scary to think that Halloween has come and gone and we now have less than two months left in the year. Where has the time gone? The only thing more frightening than ghosts and haunted houses is ending the year without knowing your 2017 projected tax liability. Tax planning is a critical tool for any business or individual.
There are several reasons why businesses and individuals should invest the time and effort to form a tax plan that is specifically tailored to their current situation. Developing a tax plan allows business owners to have an understanding of what factors impact their tax liability. In addition, tax planning gives business owners and individuals important information which allows them to make timely decisions that will positively impact their tax position. For example, given a business’s tax position and cash flow, it may make sense to invest in that new piece of equipment that the company needs to improve productivity. Investing in this equipment not only provides a needed tool for the business but could also provide Section 179 or bonus depreciation that reduces taxable income.
IRS regulations require that taxes are paid as the income is earned throughout the year. This is done through estimated payments. Making timely and accurate payments helps prevent underpayment penalties and additional interest. With a small amount of planning, you do not have to let penalties and interest haunt you. Another important tax planning tool is determining if there is a benefit to accelerating the fourth quarter state and local estimated tax payment into December, as this can help reduce Federal taxable income for some businesses and individuals. But beware of the Alternative Minimum Tax.
Lastly, tax planning is a great way to have a conversation with your accountant to discuss some of the events that have occurred during the year. It allows more time for you and your accountant to develop a strategy that best fits your current tax and financial position. Poor communication can result in missed tax saving opportunities. With the current climate in Washington D.C. and tax reform on the horizon, it is important to have a handle on your tax position now more than ever.
Here at Stephano Slack LLC, we believe tax planning is a crucial tool to help you and your business develop a strategy that fits your situation and ultimately, a strategy that helps give your business the information it needs to make informed tax driven decisions.