Have you ever found yourself trying to maximize your business tax savings at the last minute, only to find your options limited? Lack of time and looming tax deadlines can prevent you from taking advantage of all the tax credits and deductions available to your business. That's why mid-year tax planning can be vital. Planning ahead can help you identify more tax-saving opportunities for your business so you can increase your cash flow or reinvest those dollars into business improvements.
Here are four things to consider for mid-year tax planning:
1. Review and Adjust Quarterly Tax Payments. Most small business owners pay their taxes on a quarterly basis throughout the year, instead of in one lump sum during tax season. Estimating how much to pay in these quarterly installments can be tricky, and if you’ve paid too little throughout the year you could end up with a sizable tax burden in the spring. For this reason, it’s a good idea to review your business’s financial situation mid-year to determine if your estimated tax payments are on target. Individual filers can use IRS Form 1040-ES and corporations can use Form 1120-W to calculate estimated quarterly taxes.
2. Research Deductions and Credits. Mid-year is a great time to start digging into any tax deductions or tax credits that your business might be eligible for this year. Review what is available at the federal level as well as the state level. Both Massachusetts and Rhode Island have many tax credits available to businesses.
3. Stay Organized. Ensure all of your financial documents are well organized and up to date through mid-year. Locate any missing documents so you’ll be in a good place come tax season. If you've been putting off purchasing financial management software or paying for a bookkeeper, it may be a good time to reconsider in order to enhance your ability to tax plan year-round.
4. Meet with a Tax Professional. If you don’t already have a dedicated accountant or tax advisor for your business, you might consider hiring one. A business tax professional can help you implement a year-round tax strategy aimed at maximizing tax savings for your business. These financial professionals should have a good understanding of which tax deductions and credits are relevant to your business. They can help provide guidance throughout the year so there are no surprises when you file your annual tax return.
A mid-year tax evaluation can help to ensure that your business is in a good financial spot and prepared for tax season. A mid-year tax checkup also gives you a chance to implement any changes that will help your tax situation come April and can alleviate some of the stress associated with business taxes. At BankFive, we know the challenges that small business owners face, and we’re committed to helping them succeed.