Tax planning starts with current numbers
A useful projection starts with year-to-date profit and loss information, payroll, owner withdrawals, prior payments, and expected activity for the rest of the year. Using last year's return alone may not reflect a growing, declining, or changing business.
Items worth reviewing before year end
- Federal and state estimated tax payments already made.
- Business profit compared with the prior year and with the original budget.
- Owner payroll, withholding, and distributions.
- Major equipment or asset purchases and whether they are actually needed for the business.
- Retirement plan contributions and other time-sensitive planning opportunities.
- Changes in family income, other jobs, investments, or major credits that affect the owner's individual return.
Planning is more than buying deductions
Spending a dollar only to create a deduction rarely saves a full dollar of tax. The better question is whether the expense helps the business and whether the timing creates a legitimate planning benefit. Cash flow should remain part of every tax decision.
A midyear and year-end projection can help identify payment shortfalls early and reduce the chance of a large unexpected balance when the return is filed.
This page provides general educational information. Estimated payment requirements and planning opportunities depend on the taxpayer's complete situation.