Tax Season vs. Tax Planning: Top Tax Tips to Prepare for 2023
“Nothing is certain except death and taxes.” – Benjamin Franklin, 1789
More than two centuries later, this quote still holds true. As a business owner, you’re responsible for your own taxes, but there’s no denying that it can be confusing!
When is tax season?
How can tax planning be useful?
What exactly is tax preparation?
If these questions make you feel like throwing your hands (and those stacks of receipts!) up in frustration, you’re not alone! Luckily, it doesn’t have to be that way. In this article, we’re breaking down these key terms every business owner should know and sharing our top tips to help you prepare for the tax season in 2023.
When is Tax Season?
In the United States of America, tax season usually runs from January to mid-April. Tax season refers to the time frame when most people file their taxes for income earned in the previous year. This period is also known as tax filing season.
Tax season can also differ slightly depending on your business entity. For example, for most business entities such as sole proprietors, single-owner LLCs, freelancers, and C corporations, the tax season in 2022 was from January 24 to April 18 for income earned from January to December of 2021. For S-corporations and partnerships, tax season ended on March 15 instead.
If you are unable to file your tax return before the deadline, you can apply for an extension for free. This can be done electronically online or by submitting a paper form before the end of the filing deadline. Do note that this extension is for filing the tax return, rather than paying your taxes – any owed taxes will still have to be paid by their deadlines to avoid penalties.
As a business owner, it is never too early to find out about your tax season to be prepared ahead of time!
What does Tax Season Mean for Business Owners?
We can think about tax season as the “end of year review” for how your business has performed financially through the year. During this time, you will be reporting everything that has occurred in your business in the year just passed.
As part of filing your taxes, you will need to submit records of the revenue earned (income), expenses incurred, wages paid, profit and loss statements, and any other reports detailing financial activity in your business. Based on these records, you (or your tax preparer) will be able to calculate your final tax bill for the year.
Some business owners make the mistake of thinking that tax season is when they can figure out how to save on taxes. Unfortunately, this is not true. In fact, the chances of minimizing your taxes are limited once the tax year is over.
For you to be able to save on taxes, you must implement relevant tax planning strategies during the tax year. When you are in tax season, tax-saving strategies are limited as you are no longer in the same tax year. Keep in mind that it is not the responsibility of the tax preparer to help you reduce your taxes unless you work with them throughout the year and take advantage of their tax planning services.
Avoid sticker shock and maximize your tax savings by doing tax planning in advance of tax season.
What is Tax Planning?
If you are wondering how to lower your tax liability or pay the lowest tax possible, you need tax planning. Tax planning is the evaluation and review of your tax situation during the year to take advantage of tax breaks and reduce tax liabilities as much as possible.
Tax planning allows you to strategically evaluate financial decisions to make the best possible decisions during the year to reduce the amount of taxes you owe. Done with prudence and foresight, you can save hundreds or even thousands of dollars in taxes annually!
Common Tax Planning Strategies
You can tackle tax planning on your own or with the help of a tax specialist. Take time to evaluate your current position and periodically review tax planning strategies. This ensures that you are staying on track to lower your tax bill.
One simple way to reduce the amount of taxes you owe is by lowering your taxable income through deductions. Check out our Ultimate Business Tax Deduction E-Book which features over 80 tax deductions you can use in your business. You can also make retirement fund contributions from your income to reduce your taxable income or channel money into a 401(k) or an IRA. As a small business owner, another useful tax planning strategy is accelerating and/or deferring income and expenses.
The key to success (and big savings!) with tax planning is to implement these strategies during the year. Don’t wait till the last minute to implement tax planning strategies.
Why Work with an Expert for Tax Planning?
With so many moving parts to keep track of, tax planning can quickly feel like a full-time job. Working with a tax specialist means you can rest assured that they will take care of all your tax planning concerns – so that you can focus on running your business.
When you work with Exceptional Tax Services for your tax planning needs, we will guide you through the process every step of the way.
First off, we meet with you every quarter. We assess your financial position and use up-to-date and current numbers rather than historical bookkeeping records to perform a tax analysis. Based on this information, we will provide strategies to reduce your taxes or change your tax liabilities during the year. We also provide you with the estimated tax liabilities every quarter so that you can make estimated tax payments. This helps you avoid being hit with a huge tax bill at the end of the tax year.
Through this ongoing partnership, we help you reduce your taxes and ensure that you are well-prepared to take on tax season in 2023.
Get Prepared for Tax Season 2023
There is no better time than now to start getting ready for next year’s tax season. With still several months left in the tax year, this is a golden opportunity to get your books in order and start saving on taxes. By reviewing the income, expenses, and cash flow in your business, you can implement tax-saving strategies that will cut down your tax bill – but only if you act now.
Interested in reducing your taxes for 2023? Want to finish the year off strong with confidence in your business finances? The ETS VIP Week could be what you need!
Spend a week with ETS Founder and CEO, Nacondra Moran to receive laser-focused coaching and guidance on the financial aspects of your business. Get your bookkeeping squared away for the year and uncover valuable tax-saving strategies you can implement immediately. In just one week, you will gain clarity around your numbers and feel empowered to make sound financial decisions in your business. Learn more about the ETS VIP Week and book your introductory consultation here!