We’re closing in on fall maybe faster than you’d like, but it’s coming nonetheless. The kids are back in school, sweater weather is coming, pumpkin spice everything is on its way and shorter days are here prime for reflecting on your year so far. At VAST, we like to make September a time for mid-year tax planning moves.
I know you aren’t thinking about the 2018 tax season yet nor do you probably want to, but I promise with a little looking back now — you can save yourself and your pocketbook unnecessary headaches come April 15th next year.
What exactly should you be looking for?
1. Estimated taxes! I can’t stress this enough.
Have you made your estimated tax payments for 2017? If the answer is no, then it’s time to start (like yesterday). If the answer is yes, give yourself a big pat on the back- seriously! But there’s still some work to be done. We need to make sure those tax payments still make sense in relation to your income. Are you making more money this year? Do you expect to have a record breaking fourth quarter? Let’s make adjustments to those payments now, so you don’t get hit with a huge tax bill later.
2. What type of business entity are you? It might make sense to convert.
Believe it or not, the type of business entity you are has a big effect on how you are taxed. Are you a Sole Proprietorship, LLC, S-Corp or C-Corp? Different entity structures mean two primary things: legal responsibility and tax structure. At VAST, we can pop the hood to evaluate whether converting to a new entity classification will have tax benefits for your company.
3. Are you a shareholder in an S-Corp? Let’s look at your salary.
As the shareholder of an S-Corporation, you are required to take a salary that is “reasonable” in relation to your businesses’ income. It’s very important we make sure your salary and distributions stand up in the eyes of the IRS so we may avoid any unnecessary penalties.
4. Profitable an understatement? Now is the time to strategize.
We’ve had clients in the past who (without our guidance) decide to buy up loads of inventory before year end to help reduce their tax liability. Please don’t do this, at least for that purpose, because that’s not how it works. You can only write off the cost of goods sold (keyword = sold). If you don’t sell it, your tax preparer cannot write it off as an expense on your tax return. However, we can strategize smart moves like buying equipment or setting up a new retirement plan for your business that will actually save you on taxes!
September is for looking back, and we would love to look back with you for some mid-year tax planning. You can avoid the stress of big tax bills and tax season surprises with just an hour of time with your CPA. Call us to book an appointment with our tax team today! We’re here to help.
Stay tuned for our next blog post on the joys of strategic budgeting and how we recommend planning for your next big steps! Because October is for looking forward.