- Posted March 23, 2022
What Entrepreneurs Need for Smart Tax Financial Planning
Taxes are amongst the most annoying things about entrepreneurship. But having a slightly more complicated and annoying tax season is well worth all the added benefits of working in entrepreneurship, like time and location freedom. Do yourself a favor when it comes to your taxes and start planning smart for tax season. With a few simple tricks and tips later, your tax season can be a breeze. Don’t be sloppy now and then regret it when Tax Day rolls around. Here are three things that every entrepreneur needs to do for smart tax financial planning.
Keep Track of Deductible Expenses
The first thing that you have to do as an entrepreneur for smart tax planning is keep track of your deductible expenses throughout the year. As an entrepreneur, you have a lot of expenses throughout the year that are tax deductible business expenses. For instance, your cost of goods, labor, marketing, advertising, fees, and plenty of other expenses for your business can be deducted from your net business income to figure out your true income. If you don’t account for these expenses, you will be taxed on a lot more money than you should be in costs you spent to fund your business operations.
Structure Your Business Correctly
The next thing that every entrepreneur needs to do for smart tax planning is to structure your businesses correctly to avoid double taxation. When your company is registered as a C-corporation, you may be getting double taxed on your income. A C-corp is taxed on its business income, then pays the profit to shareholders in the form of dividends, which are then taxed as income for the individual shareholders. An LLC avoids the double taxation of a C-corp as it is taxed as a pass-through entity. This means that your business gains and losses are reported on your personal tax return. A certified financial planner can also over insight into your specific situation.
The Help of a Professional
The final thing that all entrepreneurs need for smart tax planning is a good tax professional. While doing your own taxes is certainly possible as an entrepreneur, it is true that it opens the door to a lot more mistakes. And if you are making a good sum of money, small mistakes can still be a lot of money. Working with a professional can help ensure that you are keeping track of everything you need to and ensuring that you are doing your taxes properly and getting the maximum in tax breaks possible.
There is little that is fun about taxes. But with a little bit of preparation, tax season can be a lot more bearable. Make sure that you are implementing these three tips to ensure that your business is in good shape for tax season.
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Contact Tenpath Financial Group for certified financial planning services.