4 Features of Tax Planning that Business Managers Should Know

by | Nov 21, 2022 | Bookkeeping & Accounting

 As a business manager, you have a lot on your plate. You need to make sure that your company is running smoothly, and that means overseeing everything from finance to marketing. But one aspect of your job that you can’t afford to neglect is tax planning. Here are four features of tax planning that you should be aware of:

1. Reduction in Tax Liability

One of the most important features of tax planning is to reduce tax liability. This can be done in a number of ways, such as investing in certain types of businesses or taking advantage of deductions and credits. By reducing your taxable income, you’ll end up owing less in taxes overall.

Tax Deferral

Another key feature of tax planning is deferring taxes. This means postponing the payment of taxes on certain income until a later date. This can be beneficial if you expect to be in a lower tax bracket in the future, as you’ll end up paying less in taxes overall.

Tax-Free Income

Another way to reduce your tax liability is by earning income that is not subject to taxation. This includes items such as gifts and inheritances. While this income may be taxable in other scenarios, it can provide some relief when it comes to your business taxes.

Use of Tax Shelters

Another way to reduce your tax liability is by using tax shelters. These are investment vehicles that can help you shield some of your income from taxation. There are a number of different types of tax shelters, so it’s important to consult with a tax professional to see if one is right for you.

2. Advance Planning

Another key feature of tax planning is that it’s best to do it in advance. That means taking a proactive, rather than reactive, approach to your taxes. For instance, if you know you’re going to have a large capital gain from the sale of a property, you may want to consider deferring the gain into another year so that you’re not taxed at a higher rate. Doing your tax planning ahead of time will allow you to make the best decisions for your business—and your bottom line. Also, by staying on top of your tax planning, you can avoid any last-minute surprises that could come up.

Review of Tax Returns

Another key feature of tax planning is that you should always review your tax returns before filing them. This way, you can ensure that everything is accurate and that you’re taking advantage of all the deductions and credits you’re entitled to. If you find any errors, you can correct them before they cause any problems down the road.

Use of Tax Professionals

While you may be able to do your own tax planning, it’s often best to consult with a tax professional. They can help you understand the complex tax laws and regulations and identify any areas where you may be able to save. They can also help you with more complex tax planning strategies, such as deferring taxes or using tax shelters.

Keeping Up With Tax Changes

Finally, another key feature of tax planning is staying up-to-date on tax changes. The tax code is always changing, so it’s important to stay on top of the latest developments. This way, you can ensure that you

3. Investment in the Right Direction

A good tax plan will also involve making investments in the right direction—namely, investments that will lower your taxable income. This could include things like investing in energy-efficient equipment or real estate located in enterprise zones. By making smart investments, you can save money on taxes now and down the road. Other smart investments include making super contributions, health insurance and negatively geared property.

4. Dynamic in Nature

Finally, it’s important to choose a tax plan that is dynamic in nature. That means it should be able to adapt as your business grows and changes over time. As your business expands, so too should your tax plan—otherwise, you could end up paying more than you need to in taxes.

A good tax plan is an important tool for any business manager. By keeping these four features in mind, you can ensure that your business is getting the most out of its tax dollars—and keeps more money in its pocket come tax time.

Tax planning is an important aspect of any business manager’s job. By knowing the four features of tax planning, you can make sure that your company is making the most advantageous decisions when it comes to its taxes. This includes reducing tax liability, deferring taxes, earning tax-free income, and investing in the right direction. Additionally, it’s important to have a dynamic tax plan that can adapt as your business grows and changes over time. By keeping these things in mind, you’ll be well on your way to effective tax planning for your business. If you need any help, here at startup Tandem we have a team of experts who can assist you. Simply book a free consultation today.

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