Welcome back to our series on how you can save big money on your taxes this year. Just a little time and effort focused on strategically reducing your taxes can pay big dividends.
Last week, we discussed the first step in saving big on taxes: strategize with your tax advisor at key points during the year.
Step two in saving big on your taxes is to meet monthly with your financial manager or bookkeeper and have a clear system for categorizing your expenses.
Your financial manager or bookkeeper should have a full understanding of your business. How you earn revenue, the types of expenses it takes to fulfill on your service or product, and should be producing weekly and monthly reports that help you read the financial health of your company.
If your bookkeeper is more data entry clerk than financial manager, look for someone new or get your bookkeeper trained up, fast.
In a future article, we’ll cover the weekly reports your financial manager should provide. Today, we’ll focus on the monthly reports and meetings because that’s where you’ll save big on your taxes.
Each month, when you review your profit and loss statement (P&L), what you are looking for is variances from the prior month and for expenses that are improperly or not at all categorized. You want to categorize all expenses properly so you can measure trends and so you can write off as many deductions as possible against your taxable income.
In late October, your financial manager will send a year to date P&L to your Tax Advisor who will then create projections based on how much you’ve earned so far over expenses and how much you expect to bring in for the rest of the year.
Then, you’ll be able to strategize to minimize the amount due. Most of these strategies do need to be engaged in BEFORE year end, so be sure you’ve got this process started by late November, at the latest.
If you have run your tax projections and are going to owe money, contact a Creative Business Lawyer® and ask for our list of year end tax strategies. We’d love to save you big money on your taxes this year. If you have not yet run your projections because you do not have a financial manager or a tax advisor, contact a Creative Business Lawyer® as well and they can refer you to the people they trust.