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Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail. Profit and prosper with the best of expert advice - straight to your e-mail.Maintain well-documented financial records
“One key step business leaders must take to ensure readiness for tax season is maintaining meticulous and up-to-date financial records throughout the year. It's also advisable to consult with a tax professional periodically to stay well informed of tax law changes. Effective record-keeping and professional guidance ensure businesses efficiently meet tax obligations.” — ,
Start cash flow forecasting
“So many small businesses do not have a budget, and even fewer are forward-looking with their finances. If you want to stay ahead of the tax monster, cash flow forecasting is one of the best ways to do it. As you add expected income and expenses to the books, you can see your quarterly income. Give that to your CPA, and they can tell you what you'll owe and how much to set aside. No more worrying.” — ,
Plan ahead for quarterly taxes
“Get proactive on tax planning! Unlike the ordinary W-2 taxpayer, business owners pay their taxes periodically (oftentimes quarterly) in lumpy installments. If they’re not proactively planning ahead for an upcoming tax payment, business owners’ cash flow can be heavily disrupted. The most disruptive period for business owners is undoubtedly April, when they’re finalizing the previous year’s taxes and making their first payment.” — ,
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Take a collaborative approach
“I advise my business owner clients that tax planning should be a collaboration between the owner, accountant and financial adviser, and that it should go beyond the scope of filing taxes and into forecasting tax liabilities and benefits. A team effort transforms the unknown into estimated ‘knowns’ that owners can fund monthly using a side-pocket account, which helps reduce the anxiety and worry of paying taxes.” — ,
Build up cash reserves that can be used beyond your payment
“I advise that business owners and entrepreneurs maintain adequate liquidity for estimated quarterly tax payments. I collaborate with their tax professionals so that my clients are not unpleasantly surprised. Any excess cash reserves above and beyond quarterly tax payments can also be used to fund a retirement plan, which can reduce their tax liability.” — ,
Leverage an interest-bearing account
“I recommend hiring a good accountant to advise you on your tax outlook. You should set aside money that will be needed for taxes as you earn it. You can pay quarterly estimated tax payments, or you could open an interest-bearing account and accumulate a percentage (this varies based on the business) of your gross sales into that account. You will have access to it, earn interest and have the money when taxes are due.” — ,
Related Content
- Need to Create a Business Tax Plan? How to Work With Your CPA
- Family Business Survival Strategies as Tax Landscape Changes
- For Best Tax Savings, Year-Round Tax Planning Is Essential
- Audit-Proof Your Small Business
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