Many Michigan residents have experience in dealing with taxes related to their small businesses. When running a business, any change in overall revenue often necessitates a review of related tax obligations. Failing to do so in a timely manner could set someone up for an unpleasant surprise when tax season comes around. However, there are some ways of planning ahead and perhaps even limiting the liability to a certain extent.
If revenue has improved significantly, starting a retirement plan may be a viable option. Whether in the form of a 401(k) or individual retirement accounts, retirement plans are typically tax deductible and highly incentivized by the Internal Revenue Service. Another relatively simple means of claiming deductions may be to purchase new furniture or business equipment that may be qualify for the Section 179 deduction. In addition, effective business planning sometimes requires some amount of forecasting to ascertain the degree to which estimated tax payments will have changed from one year to the next.
Some businesses change in structure over time, and what once worked for a sole proprietorship might not be optimal for a larger organization with more revenue. For example, while incorporating can potentially bring its share of challenges, it can also have various tax advantages as well, and increasing employee benefits can potentially save money on payroll taxes.
Taxation related to company ownership and business operations can sometimes be a complicated affair. Business entities in the past have lost money due to improperly filed tax returns, and some business startups may be entirely unable to afford the expense. For this reason, it might be advisable to consult such matters with an attorney beforehand. An attorney might help to review an organization’s accounts and operations and identify areas where its practices could be optimized for tax purposes.
Source: FOX Business, “5 Tax Planning Tips for Your Small Business“, Bonnie Lee, July 11, 2014