This last Planning blog is not part of the year end planning session, but more of a once a quarter thing, that you should be doing with your accountant and still just as important as the end of the year planning.
Tax Planning should be done quarterly with your accountant. There are a couple of things that you want to make sure is being done. You don’t want to zero out your profit or take majority of distributions out of your business instead of a paycheck. Here are the 2 reasons why: Since COVID, banks have been putting business owners under a new magnifying glass and they are wanting to see a Profit on your corporation returns and Schedule C’s. They also want to make sure you have the salary to pay for the loan you are getting. If you don’t have the W2 or paystubs to show what you make, how can you pay for the loan? The second reason is the IRS is going to start targeting S Corps and Partnerships, making sure that you are paying your far share of taxes and not just taking distributions. Be careful with that grey area of rules.
With the quarterly tax planning, your accountant is taking the real numbers of your business, such as the paystubs and offsetting any credits and deductions that you might be eligible for. This is to create your refund or tax liability. If you have a tax liability, you can send in quarterly estimate tax payments, or adjust your federal withholdings, either way works.
Keep that communication open with your accountant, so you are on the right track, and don’t get surprised with a large tax bill at the end of the year. Knowing throughout the year will help you prepare to put more in the retirement accounts, or spend some more on marketing, etc.
*Disclaimer: Tax Planning should be done with your Tax Professional, one that is licensed with the IRS having a PTIN. If they do not have a PTIN find someone else to do this with. *
Sorry for the disclaimer, I have seen to many bookkeepers give bad advice, that cost the clients thousands of dollars. At Pina Business Services, there is an accountant who is licensed with the IRS, so if you need help don’t hesitate to make an appointment at https://go.thryv.com/site/pinabiz!