I work with small businesses every day. I truly enjoy this arena of tax and accounting. Small businesses are nimble and decisions can be made quickly by the owner. Where most small business are deficient is on the planning side of tax and accounting. As each year winds down, most small businesses do not do a tax projection to see where their tax liability is going to fall, and more importantly, what they can do about it. Once the New Year rolls around, there are few things that can be done to help with the liability.
With a tax projection, you can start to plan how you are going to pay the liability or take action that could potentially lower your tax liability. A few examples of that would be purchasing equipment that the company needs, paying bonuses to employees, or making a discretionary contribution to the company 401(k) plan. By knowing what the potential tax liability is, the owner can make an informed decision as to how to tackle the liability.
With the many changes to the tax code for tax year 2018, going forward planning is even more important. With the potential Qualified Business Income Deduction for pass-through entities (i.e. sole proprietors, farms, rental activity, S corporation) the planning is key to being able to maximize out your potential deduction. A little planning will go a long way in the healthy operation of your small business.
If you would like to know more, please reach out to us. As I mentioned, this is one of my favorite areas of what I do.
Greg Smith, CPA, MBA