March 24th, 2014 : Save Taxes With Smart Business Income And Expenses Timing
Smart income and expense projection is something that any business can benefit from, but when it comes to saving on taxes, these projections become particularly important. Tax amounts depend greatly on income and expenses when it comes to all types of businesses, but certain timing methods can allow any type of business to defer or save taxes during the course of any given year. High tax amounts can be difficult for many businesses to handle, so making these taxes as low as possible is important to keep a business profitable and able to reinvest in itself for growth.
If a business expects to be in the same or a lower tax bracket for the year, they can expect to use different projection and tax methods than another company who expects to reach a higher tax bracket. However, both methods will include making accurate projections as well as deferring certain expenses while accelerating others. No matter the bracket, smart money management and accurate projecting is crucial to being able to save money on taxes in any given financial year.
If the cash method of accounting is used, deferring billing until the following year, if possible, is a great way to save on the previous year’s taxes. If sales are made towards the end of the year, this billing can be done as soon as the New Year begins, and this allows a business to save on the money made from these end of year sales and remain in their lower or continuing tax bracket. As a company moves up in tax brackets, they will be expected to pay more in taxes, so keeping in a lower bracket is often most desirable. By deferring this billing until the following year, a company can remain in the same tax bracket as they were before, thereby allowing them to pay somewhat less in taxes.
Another way to save on taxes would be to take advantage of deductibles, and accelerate all possible write-offs for a current year. Deductibles can help a company to save money on taxes, as they allow money to be deducted from how much a company may owe. A person can write-off charity work, business related expenses, advancements made to a company to help it to be more environmentally sustainable, and many other things, but it is always best to check just what may be able to be deducted in a desired state during the course of any year. Deductibles and tax credits can sometimes change on a yearly basis, and keeping up to date with what may be able to be deducted is important to efficiently minimizing tax costs.
In terms of accelerating this process, a company should file any and all write-offs, and make purchases, donations, or changes that can garner them a deductible, before a financial year is through. If a company wants to move to a lower tax bracket or remain in the same bracket, writing off certain expenses is a great way to do so. Before a year is over, and taxes are filed, make sure to take note of any and all possible deductibles and see if there is a way to have these expenses written off for the current year’s taxes without moving over to the following.
For companies that are moving to a higher tax bracket, these methods are also important. While moving to a higher tax bracket will often mean a company is growing and becoming more profitable, it also means that more taxes will be owed at the end of the current year. Deferring payments, taking advantage of written off expenses, and smart projections can also help in this regard, and any company of any tax level should take advantage of these practices to ensure they have the lowest tax amounts possible.