Tax planning is a way to minimize your tax liabilities. There are many allowances, exemptions, deductions, and exclusions in taxes that can reduce the amount a person or a business owes to the state. Tax planning, done with the help of a professional, is completely legal and compliant with IRS standards.
In this blog, let’s take a look at why tax planning is so important for individuals and businesses both.
The Importance of Tax Planning
Tax planning can help businesses and individuals counter rising inflation and survive in today’s economy. For businesses, this means reducing expenses while minimizing returns to improve their cash flow. For individuals, tax planning is more about minimizing taxes on their investments and avoiding the legal implications of not filing in time.
Tax planning not only reduces tax bills but also provides a flexible schedule for paying taxes. Paying a huge amount upfront can be difficult, but spreading it out over a year can help you manage your finances better since you have more control.
Types of Taxes to Plan For
Corporate tax planning allows companies to decide whether they should defer their profit and income to minimize the tax bill. Strategies are formulated to bring costs forward for different accounting periods to make use of capital allowances.
Capital Gains Tax
Businesses buy and sell assets throughout the year, which is why they need to plan for capital gains tax. The same goes for individuals who purchase or sell investment assets, like stocks, precious metals, property, etc and make a profit on it.
Planning ahead for capital gains tax according to the profits can help you and your business avoid a hefty sum at the end of the tax year.
Inheritance tax planning is important for individuals, especially if you own investment assets, like property. The state can impose heavy inheritance tax on your property after you pass away. Inheritance tax planning strategies include taking new mortgages, giving the property as a present, restructuring pension funds, or simply downsizing your investment portfolio.
In modern times, many businesses deal internationally. International tax laws differ slightly, but you would want to avoid paying double taxes. International tax planning can help businesses time their tax payments accordingly and take advantage of foreign tax credits.
Working with a professional is the best way to ensure you’re planning for your taxes efficiently while staying compliant with the IRS. If you’re in search of one, Nidhi Jain can help you.
She’s a certified public accountant and runs her own accounting firm in Dublin, California. We offer tax planning, individual and business tax filing in Bay Area, and tax consultation services to businesses from every background.Our other services include payroll management, Bay Area bookkeeping and accounting, cash flow analysis, and more. Contact us now for more information.