Running a business without a plan is likely to result in one’s company being run into the ground. Flying by the seat of one’s pants may not help produce the successful business one wants. So business planning is essential, as many company owners in New Jersey know, but it is not the only planning one should do. Tax planning or the failure to do so can also make or break a business.
There is nothing wrong with wanting to save on income taxes. No one wants to pay Uncle Sam more than he or she has to. There are several ways business owners can keep money in their pockets and out of government reach.
The first thing business owners can do to lower their tax liabilities is to defer their income and accelerate their expenses. Deferring income and timing large purchases can work together to reduce how much one has to pay in taxes in a given year. One has to look ahead, though, in order to determine if it is a good year to do either of these things.
The second thing company owners can do to reduce their tax liabilities is to accept one’s losses. Depreciation, or the decline in asset value, may be deductible. While no one likes to take such a loss, doing so can lower one’s overall tax bill.
The third thing one can do is put money in a retirement plan. Business owners can put a good chunk of change away in a retirement account every year. Most retirement accounts take tax-deferred contributions, meaning taxes are not paid on that money until one starts taking distributions later in life.
Finally, the fourth thing one can do is take all deductions for which one qualifies, within reason. There are a lot of deductions available to business owners. Use them if it makes sense to do so.
Tax planning has its benefits, yet it is something that many business owners in New Jersey fail to do. Given the potential savings, it is certainly worth one’s time. Now is a good time to have legal counsel walk one through tax planning strategies that may prove beneficial to one’s business.
