Looking to avoid high tax bills? You and everyone else who owns a business! We all want to lower our tax bills, but it’s important to note that paying taxes isn’t always a bad thing. If you’re making a profit, you’re going to pay taxes. That’s good. It means your business is growing.
We’re back once more with Julie Shopa of Clarity Finances in Florida to conquer the question: How can I lower the taxes I owe at the end of the year?
Let’s dive in.
How to Lower High Tax Bills
First and foremost, lowering your tax bill begins with having a grip on your finances. Without a certified bookkeeper, that’s going to be difficult to achieve. So before you jump into lowering your tax bill, make sure that your books are organized, balanced, and reconciled. Once that’s done, sit down with your financial advisor (or CPA) and ask:
Have we claimed all the potential deductions? Certain expenses are deducted at different rates than their counterparts. When you sit down with your bookkeeper, ask him or her if you’re claiming all the deductions you can. More importantly, ask them questions like: “Is it better to depreciate the car and claim the loss or claim the mileage?”
How much should I save? Though it may not be an exact number, your CPA or bookkeeper should be able to give you a general estimate of the money you will owe. This guideline will help you understand how much money you need to have ready when the tax bill arrives. Likewise, your bookkeeper can advise you on how much money you should save outside of taxes, too.
Do I need to make a purchase? Q4 can be a volatile quarter. If you’ve made more sales than usual, your bookkeeper may recommend that you make a planned purchase this year instead of next. This is to help balance your pre-tax and post-tax income.
Final Thoughts
When Q4 rolls around, start working with your CPA and bookkeeper to prepare yourself for taxes. To avoid high tax bills, you need to make sure that you’re managing your money wisely. Ideally, you should start this process in October rather than November or December. Remember that when the first rolls around you, you can no longer adjust your books.
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