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Small Business Owners: Start Planning for Next Year’s Tax Filing Now

Your tax returns for 2016 are done and possibly forgotten, and the last thing you want to think about is your 2017 taxes. So you’re probably not going to want to hear this next part:

Right now is the best time to start thinking about next year’s taxes.

When you only deal with your tax responsibilities just a couple of months before the IRS filing deadline, you cheat yourself. For one, the best way to save on your taxes is to plan for possible deductions and credits ahead of time; once you get to January or February, all you can do is look back at last year and hope you qualified.

Moreover, trying to jam a year’s worth of organization and preparation into a frenzied few weeks is the ultimate recipe for a visit from the IRS.

We suggest a different tactic: Start now. You’ll not only reduce your chances of being audited, but you’ll also have plenty of time to make the financial moves necessary to minimize what you’ll have to pay the government, or maximize what you’ll get back.

5 Tax Planning Tips to Get Ahead on Next Year’s Filing

1. Pay Ahead: Self-employed small business entrepreneurs should pay special attention to their estimated quarterly payments. That’s because while quarterly payments are typically a requirement, not optional – and come with penalties for failure to pay – they’re also good for avoiding year-end shocks. Make sure to properly estimate how much you will owe every quarter, then pay it by the quarterly deadlines. If you’re a shareholder of an S corp, you must make sure that you take a salary and pay estimated quarterly taxes on that, too.

2. Start Bunching: Some individuals opt to claim the standard deduction on their taxes. However, some people rack up enough medical expenses, give enough charity, etc., to know that they’ll be able to itemize their deductions year in and year out. Most people fall into a grey area in which they might be close to being able to itemize, but are too close to the line to be certain. “Bunching” is a two-year cycle in which you pack a bunch of itemized deductions into one year to get over the standard deduction threshold, then simply take the standardized deduction the next year when you have very few itemized deductions. You can do this by making tweaks such as doubling your charitable giving every other year, or overpaying your state taxes by double.

3. Adjust Withholdings: If you find yourself owing additional taxes year-in and year-out, you should consider adjusting your withholdings right now. Let’s say you underpaid by $1,200 for calendar 2016, and you expect to make the same in 2017. Rather than waiting until April 2018 and taking the $1,200 hit then, you should withhold $150 more per check for the next eight months to spread the pain thin over the rest of the year. Or conversely, if you receive a big refund every year but would prefer to receive your money upfront for bills and other expenses, reduce the amount you normally withhold.

4. Keep Track of Tax Law Changes: The IRS typically doesn’t do wholesale overhauls every year, but they do tweak certain things, such as qualifying requirements and dates of importance. We’ve recently outlined some tax rule changes for small businesses, including some updated filing dates, lower mileage rates and adjustments to automatic extensions.

5. Talk to the Pros: Every person and every business has differing financials and differing tax needs, so while broad tips can help point you in the right direction, the best way to plan for maximum tax benefits is to create a personalized plan with a certified tax professional. McManamon & Co. offers a broad array of accounting and tax services for small- and midsize businesses, and by starting early, we can help you identify tax credits and deductions, then shape a financial plan that will allow you and your business to easily qualify for them.

No business owner has any business waiting until the last minute to get their taxes in line. Get a jump on next year’s filing now by calling McManamon & Co. at 440.892.8900 or getting in touch with us online.


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