Aligning your annual plan with your business tax strategy is a great way to ensure your business is achieving its short-term and long-term goals.
Your business tax strategy should be an important part of the overall business plan. It will help you:
- Maximize profits
- Minimize taxes
- Make more informed financial decisions
- Ensure the IRS is happy
Why Aligning Your Annual Plan with Your Business Tax Strategy is Important
An annual plan guides the company by using smaller goals that feed into a larger vision for year-end.
- Annual plans:
- Focus your company
- Improve performance
- Help reach business goals
A business tax strategy helps you minimize taxes and maximize profits by taking advantage of available credits, deductions, and other incentives.
By intertwining the two, you are ensuring you have an annual plan covering all the bases, keeping you on track all year long. Let’s look at how you can align your annual plan with your business tax strategy.
First, Review Your Current Tax Situation
It is important to understand which tax laws are relevant to your business to help minimize your taxes while ensuring that you comply.
Once you have a good understanding of your tax obligations and opportunities, start by looking at the financials of your business. Then ask how they will impact your overall tax liability.
Keep Your Goals at the Center
As a business owner, getting lost in the complexities of tax planning and losing sight of your goals for the year can be easy, but a critical mistake.
Take a snapshot of what you want to achieve this year and use it as an anchor point when evaluating any financial decisions.
Review your original goals and objectives, then analyze the potential implications of taxes on your plan to see where adjustments may be needed.
By keeping your business goals at the center of all decisions, you can ensure that any adjustments are effective and save you money in the long run.
You’ll soon see how making strategic spending adjustments can help you stay on track to achieving your overall vision for your business.
Create a Comprehensive Tax Strategy
A comprehensive business tax strategy should include both short-term and long-term goals. It should consider all sources of income, expenses, investments, business purchases, and any other elements that could impact taxes.
Let’s take a closer look at what it takes to build a comprehensive tax strategy.
Gather important documents
Start by gathering financial information such as business income and business expenses.
You’ll want your financial statements handy as they give valuable insight into your business.
Outline relevant credits and deductions
Once you have gathered your information, create an action plan outlining strategies to reduce business taxes.
This will include exploring business tax credits, tax deductions, or other tax-advantaged investments.
For example, maybe you consider purchasing specific items before year-end or donating to charity to decrease your amount of tax liability.
Include retirement planning
Don’t forget to plan for retirement. Establish a retirement plan that allows you to defer taxes on your contributions and provides a long-term benefit that grows your business’s value over time.
Setting up a retirement plan can help you reduce business taxes and save for your future.
Consider your business structure
Your business structure can have a major impact on your business tax liability. Consult an accountant or lawyer to determine the best business structure based on taxes, legal considerations, and other factors. You may have to restructure your business, but if it lowers your tax bill, it’s worth it.
Keep up with changing regulations
Tax regulations change all of the time, so make sure you stay up-to-date on any changes.
By keeping your tax strategy updated and aligned with the latest tax regulations, you can ensure your business isn’t making any mistakes and is taking advantage of every applicable opportunity.
Monitor Your Progress
Review your business plan throughout the year to make necessary adjustments.
Ensure your tax strategy is moving you closer to the goals in your annual plan, not further away.
Stay in Touch with Your Accountant
Developing and implementing an effective business tax strategy that covers all your bases takes time and effort. However, it’s a proactive approach that’s worth the effort to ensure all business decisions align with your goals and tax strategy.
It is important to stay in touch with your accountant throughout the year. They’ll serve as an accountability partner, ensuring your decisions align with your goals and tax strategy.
The more frequently you communicate with your accountant, the greater success you will have in achieving the desired outcomes for your business.
Momentum Tax & Financial offers a broad range of services for professional service companies, real estate businesses, and non-profits. Contact us to learn more about how we can help you align your annual plan with your business tax strategy!