Taxes are a common headache for business owners because regulations are often complex and hard to navigate. They’re also completely unavoidable, so it’s necessary to have a solid strategy in place to minimize your business’s overall tax burden. In this Countdown to 2024 article, we’re preparing businesses for the next tax season with several considerations to make filing as pain-free as possible and empower future planning strategies. If you missed the last article in our series, we covered finances and what it means to have a clear financial view into your business.
Start Compiling Documentation Ahead of Time
A seamless filing experience requires some organization. With tax season fast approaching once the new year rings in, now’s the time to begin gathering necessary tax documentation, such as receipts, invoices and financial statements. After you’ve compiled these documents, review them once more to ensure all income and expenses are accurately reported so that you can confidently file come tax season. It’s also recommended to review your business plan during this time to find potential tax credits or deductions your business may be missing out on. This leads us to our next consideration.
Take Advantage of Tax Incentives and Credits
Your business may be eligible for tax deductions and credits that can help lower your tax liability. For example, you may be able to deduct expenses related to research and development or claim tax credits for hiring and training additional qualified employees. Common business tax incentives include, but aren’t limited to:
- Investment credits
- Contractor tax refunds
- Property tax abatements
- Employment credits
- Sales/use tax refunds
- Forgivable loans or low-interest loans
- Job training funds
As you review your business expenditures and growth plans during year-end, determine whether you qualify for any tax incentives offered by your state or industry. Applying for tax credits is a great way to generate additional cash flow, a benefit that many business owners are aiming to do with interest rates still high.
You may also want to consider exploring tax credit options, because the IRS recently placed claims processing for the Employee Retention Credit (ERC) on hold. The IRS is trying to crack down on the growing rate of fraudulent ERC claims being submitted and has advised businesses with claims in progress to expect long delays in processing. If your business hasn’t applied for the ERC yet, the IRS recommends you reach out to your trusted tax advisor to review options, but applying for other credits may be your best bet. For more information on available tax incentives and eligibility requirements, check out this article from our team.
Review Your Expansion Plans
The primary goal for most businesses is to grow and become/remain profitable. Expanding your business presence requires generating additional sales, whether online or across state or national lines. Growing sales is an exciting thing, but it requires preparation and diligence to ensure your sales taxes are compliant. Each state and municipality has their own set of sales tax guidelines for businesses to adhere to, and it’s up to the business to navigate them.
For example, Colorado recently rolled out a retail delivery fee (RDF), and other states such as Minnesota have followed suit and released their own. If you have a physical or remote sales presence in these states, a small fee is included on taxable shipments to customers. Businesses are then responsible for paying those fees at the time of filing their sales tax returns.
On top of the immense amount of variety among sales tax laws, these laws also change constantly. As you look through your growth plans this year-end, if the plans involve expanding your sales presence in new places, you’ll need to confirm that you understand the tax laws in those destinations.
It’s recommended to consult with your tax advisor to assist with sales tax compliance — especially if you have experienced recent growth and operate in a multi-state environment. If you don’t currently work with an advisor, you may want to consider partnering with one. The right tax advisor can bring clarity and insight to your sales tax filing through expertise, resources and tools.
Handling taxes is an inevitable part of running a business. Even though filing rules and regulations aren’t getting any easier, spending time on forming a strong and agile tax planning strategy is a great way to streamline filing processes and take back control of your business taxes.
At Creative Planning Business Services, we have a team of dedicated business tax professionals to help you navigate changing tax laws and optimize your tax strategies. Contact us today to learn more about our range of tax services and how we can make your business’s next tax season the most seamless yet.
In our next Countdown to 2024 article, we’ll discuss an aspect that often defines a business: its people. Stay tuned as we share more about the importance of having people-focused strategies around recruiting, retention, succession planning and more!