Small Business Income Tax Planning & Preparation 2011, 2012

For any small business, considering the tax impact of major transactions is one of the most important things you must do. As tax planners, we like to say, “don’t let the tax tail wag the dog.” But we wouldn’t cut the tail off our dogs either.

Small business tax planning is as important as the preparation and filing of returns. You can accurately project and predict what you will owe, how taxes will affect your profitability and whether one course of action may be better than another because of the taxes you will ultimately have to pay.

Here are a few key points to keep in mind to make tax planning more effective and to blend it in to your tax preparation process as well.

First, think in terms of your business objectives. Consider what you’re trying to accomplish from a business perspective and then calculate the tax impact you can expect from one or more decisions you could make – not the other way around. If a new path is profitable, even taxes won’t take it all away.

Second, remember that there may be different ways of accomplishing the same thing and one may be better from a tax perspective than another. Have a checklist of deduction possibilities available when you run the projections you’re considering.

Third, maintain the records you use in planning your business activities and taxes. They will come in handy when you prepare your taxes as well. And don’t forget to keep the calculations you made, so you can measure your performance against your plans. You’ll be glad you did!

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