Whenever you hear the words “tax planning,” you probably think of personal exemptions or standard versus itemized deductions. While these income tax considerations are important to individuals, they’re not what corporations or those in business management need to contemplate.
This article highlights some of the most important tax tips for corporations and companies. We call it Tax Planning: Corporate Edition.
Tax Avoidance Options
If your business is looking to reduce its taxable income (i.e. tax avoidance), then consider accelerating payments for expenses that you’ll likely incur anyway.
For example, pay year-end bonuses before December 31st. If you intend to give bonuses to your employees and can afford to do it before the year ends, do so. This will increase payroll expenses, which helps to reduce taxable income for the year.
Another option is to purchase capital assets before December 31st. If you have delayed purchasing computers, furniture, office supplies, etc., then buying those items before the year ends will add expenses and deductions, which will reduce your business’s overall taxable income.
Corporate Alternate Minimum Tax (AMT) Considerations
A corporation may be required to calculate its income tax liability using the regular tax code and then also using the AMT rules. The higher of the two calculations is the tax amount due for that year.
Because not all business structures are subject to the AMT, your company may be exempt. Also know, certain income levels affect whether AMT rules apply or not. If your business has grown tremendously in recent years, we strongly suggest speaking with a tax professional about AMT.
Get Corporate Tax Planning Help from Morgan & Associates
Planning early is the key to paying less in taxes each year. It is much harder to take advantage of the options above (plus even more are available!) if you wait until it’s time to file taxes.
If you’d like someone to help you plan for your business’s taxes, then reach out to Morgan & Associates. We have the experience to help you take a proactive approach. 2022 is quickly coming to an end so don’t wait!