Has your tax planning strategy not yielded the expected results? If so, you should devise a new one to ensure your business reaps all the available benefits.
This sort of planning refers to the activity practiced by companies to minimize tax liability by using all permissible concessions, deductions, rebates, and allowances. There are licensed professional accounting firms, such as borderlesswealth.com Certified Public Accountant, providing accounting services in the US and Canada.
Have a look at the best strategies recommended by a Vancouver accountant.
Defined benefit plans
The first tax planning tip from a Vancouver accountant is to define benefit plans. This term refers to retirement plans sponsored by employers, available to businesses of any size, even to those with a single employee. Both employers and employees stand to gain from defined benefit plans.
While employers receive tax deductions, employees are provided with fixed benefits when retirement comes. For instance, by putting $200,000 into such a plan with the objective of saving for retirement, tax savings can reach up to $80,000.
Another corporate planning strategy is to reduce liability in order to improve profitability. By conducting the right plan, companies gain a better understanding of their compliance requirements with local legislations in the country where they operate. Also, by knowing the benefits and incentives available to businesses, your company can experience a real improvement in profitability.
Nevertheless, businesses are advised to collaborate with an experienced planning strategist to receive guidance and advice in this field, which leads to making informed decisions on protecting their firms. These professionals will make sure your firm is aware of the available benefits and complies with the necessary regulations. Check out the following definition of tax planning.
Write off unpaid debts
Another planning strategy recommended by a Vancouver accountant is to write off unpaid debts. It’s feasible for certain unpaid, aged debts to be eligible for elimination in view of taxes. By writing these debts off, the tax burden of your company will be significantly reduced for the current year.
Nevertheless, this process is likely to involve some complications, such as the customer paying for his/her bill in the future. In such scenarios, the firm is supposed to reverse the write-off. However, a consultation with a professional advisor is highly recommended when addressing bad debts.
Check your accounting method
Another strategy to take into account is reviewing your accounting method. Company owners with gross income lower than twenty-five million dollars can use either the cash or the accrual accounting method. The former recognizes income upon receiving it and expenses upon getting paid. The latter recognizes income upon earning it and expenses upon their incurring.
In general, the cash accounting method is believed to provide more benefits to businesses. Nevertheless, every firm is expected to consult its advisor prior to making such a decision. There are numerous forms to consider if deciding to make the switch. Follow this link, https://www.bankrate.com/glossary/a/accounting-method/, for an explanation of accounting methods.
Ensure good bookkeeping
Practicing good bookkeeping is an essential aspect of each tax planning strategy. Even though bookkeeping is tedious and dull, it has to be accurate and timely so as to be used as a tax-reducing tool. It involves the reconciliation of balance sheet accounts, as well as reviewing balance sheets and profit and loss statements for errors. By staying on top of this process, new deductions can be identified easily.
Documentation should be kept current
Current documentation is a crucial way to support a tax planning strategy. It also provides the required support in the event of an audit. Such documentation includes loan documents between you and your entities, agreements between you and your entities, mileage logs, activity logs, receipts, etc.
Understand the influence of property sales and purchases
Tax is influenced by equipment, business vehicles, rental properties, and other forms of investment. The inclusion of these items in your planning strategy enables significant opportunities for savings. For example, by selling a real estate piece and then using the money to purchase another property, your company can avoid tax on the real estate piece you sold.
Hire a professional accountant to handle this aspect on your behalf!