Reasons Why Business Owners Should Start Preparing for Taxes Now

Back to Blog

OCTOBER 28 2021

Takeaway Tax

We are already 20 days into the 4th quarter of the ongoing tax year, meaning nearly 70 days are left until the ongoing tax year ends. As a responsible business you are, you need to start business tax planning now. While procrastination for a few more days (or even weeks) seem perfectly fine now, any unattended tax work can have dire consequences for your business in the future.

The fact of the matter is that timely business tax preparation can help businesses plan ahead for cash flows, take advantage of various tax-minimizing schemes and avoid penalties due to last-moment delays among several other benefits. This is equally true for each entity that pays corporate tax, including small business owners, S-Corps and self-employed individuals.

It has been found that businesses who start business tax planning early are less likely to commit errors/ mistakes in official documents during the filing phase; hence, avoiding the hassle of filing amended returns, penalties for late filing, and ultimately achieving peace of mind.

It may be true because of the fact that early business tax preparation means more time to sort documents and plan tax exemptions, better access to quality tax accountants (as they are not as busy as they are during the peak season), and more informed decision making related to tax shelters.

Corporate tax planning during or before the 4th quarter becomes more crucial for those self-employed individuals and corporations that are likely to get a tax refund.

On one hand, timely business tax preparation allows timely tax refunds, and, on the other hand, it reduces the likelihood for identity thieves to claim your tax refund with fraudulent documents. The importance of getting free cash in the form of early tax refunds is obviously well understood by all businesses.

Now that you have been sensitized with the necessity of timely business tax planning, there is a need to briefly go through some of the main steps you need to perform in order to gain maximum out of your tax planning. Remember that there may not be any hard and fast rule in this regard, as the situation of each individual business varies significantly, some of the main steps applicable in most situations are discussed here.

Since it is still the last quarter, it could be hard to predict the exact tax bill (or refund) at this stage. Hence, one of the first things you could do at this stage is to prepare a forecast of income and expenses for the last quarter, and to estimate your overall tax figure. This may also indirectly help your business in budgeting for the next year.

Once you are able to prepare an estimate of tax liability, you may want to look for a tax shelter, which is basically a legal tax minimizing strategy that uses a range of options and strategies to legally reduce overall tax liability.

Employer-sponsored retirement plans (401K), municipal bonds and placing assets into tax havens are some of the common forms of tax shelters. Depending upon individual situations, a business may or may not want to go for a tax shelter.

At this stage, you have already estimated your tax liability and some of the ways you are going to minimize it. Now is the time to actually start preparing your taxes. It is time for you to get organized and start a filing system for your expenses.

See if you have any outstanding report that requires fixing. Make sure all the required documents, reports and vouchers are readily available and updated. Meanwhile, you may continue to work towards qualifying your business for various grants and see if your business could avail tax credits.

Last but not the least, if you ever feel overwhelmed during any stage of business tax planning or tax preparation, don’t be hesitant to find professional help like TakeAway Tax. In fact, the professionals at TakeAway Tax recommend a mid-year business assessment. Think you’re too late? Absolutely not! There is still time to make changes that will benefit your business. With a simple document upload system and a no hassle virtual service, our TakeAway Tax professionals will get you on the right track for your business.

A dedicated tax professional can help your business minimize tax bills and avoid penalties.

If you find yourself in need of professional help, you may want to contact one of our licensed partners for a one on one virtual meeting for better tax planning and business assessment.