A few straightforward tax planning tips for the small business owner
For many, tax is a sizeable “expense” of doing business.
Business owners have always had opportunities to lessen their tax bill, legally. The focus has always been on the small business owner to “find” an accountant who is prepared to help them. Until they did, they were repeatedly oblivious of what “clever” business owners have already been claiming all of these years.
Every month, I notice entrepreneurs who fritter enormous time, effort and funds setting up and growing their business ventures but facing contant pressure with poor cash flow. When they do ultimately earn a return and have capital to spare, the prize for the success is a tax demand!
Like you, I regard my time as being valuable and I don’t enjoy the thought of working more than I have to, only to pay the tax office. Simply envision how many days you toil for each year solely to settle your tax bill! Simply imagine how many “bonusr” days you would have if you didn’t shell out so much tax.
Time and time again, I have seen too many people pay too much tax due to a lack of know-how, information, and terror from the tax department. How often do you squabble over whose round it is at the pub; or that you have been overcharged 50 cents at the check-out?
Yet extraordinarily, countless entrepreneurs aren’t ready to scheule any time to understand how they can lessen their income tax bill. As a chartered certified accountant who has worked in the UK, Europe and now New Zealand, I have been honored to become involved with many small business owners.
However, many of them have never had the faith to pose demanding questions to their accountants and have never challenged the “status quo”. That’s a shame as so many have taken risks, worked incredibly hard and made countless sacrifices along the way with little remuneration.
Just imagine what you would buy with an extra few thousand dollars if you did not pay as much to the government!
Recently, I had a conversation with a very upset ex-small business owner (who was not one of our clients) who informed me she’d recently gone out of business. As we talked about her business in more detail, it became noticeable that she hadn’t deducted anywhere near all of the expenses that she could have done over the years.
As tax laws changes regularly, every small business owner should engage a competent accountant. Whilst several small business owners try to organise their own tax affairs and think that they could save expert accounting and tax consultants’ bills, a skillful tax accountant ought to be able to save you cash. Tax planning is often broken down into two types:
The 1st one involves identifying the effects of accounting for either one separate business transaction or a group of similar transactions; the 2nd one relates to looking at the overall business structure, either when it’s being set up or at a later stage.
Although, the same tax law applies in both cases, tax planning steps for each will possibly be distinct.
The effect of tax planning is more often than not to either reduce or remove (legally) any tax liability and 2 important steps to do are by allocating income to a taxpayer who may attract a smaller tax consequence; and increasing the amount of taxable deductions you get. So, as the 2009/2010 income tax year draws to a close, take some time to ask your accountant the “tough questions”.
Remember: You may be paying more tax than you need to!
