Tax Planning for Private Corporations

1. Examine your business plan

Go over it again and again, implement it, and compare it to the results. If you don’t have one, make a comprehensive written plan that includes your objectives and goals.

2. Budgets and taxes for a multi-year period must be prepared

Meet with your tax adviser to discuss provisions in the new tax act and to take measures to reduce your tax liability over the next few years. Intelligent planning may include aligning equipment purchases with your budget to maximize tax savings through business expenses and Section 179 bonus depreciation. Not to mention your local and state taxes.

3. Keep Current on New Tax Regulations

The 2017 tax cuts and jobs act was the most significant change in tax legislation in 30 years, and it included many new small business tax provisions, such as the 20% Qualified Business Income deduction for owners of partnerships, S-type corporations, and sole proprietorships. The QBI deduction was created to provide these businesses with a benefit similar to the new flat 21 percent tax rate for C-type corporations.

4. Innovate for the Long Term

Your products and services may be selling well now, but will they continue to do so in five or ten years? Remember the Blackberry, the first smartphone? What happened to them? They did not innovate. Innovation is vital not only for the future of your company, but it may also save you money through tax benefits like the Research & Development Tax Credit. It is available through the IRS as well as in several states. Furthermore, the credits can be used for both successful and unsuccessful research initiatives.

5. Take a look at your tax entity structure

 With the recent changes in corporate and individual tax rates, particularly the new 20% deduction for S-type corporations on qualified business income (QBI), now is a good time to review your company’s entity structure. If you are a sole owner or a single member, you might consider incorporating a subchapter S to take advantage of the 20% deduction.

6. Examine your accounting and internal control procedures

You should always look for ways to improve the performance of your accounting and finance departments. You can improve your cash flow by making a positive contribution to your billing, collecting, and payable accounts.

7. Keep your data secure 

When you have strong IT professionals in your organization, you must participate and understand the safeguards for your data security. Each company must ensure that its data is tested and that its security measures are implemented and documented. If your company has been hacked, the consequences for your reputation, brand, and the costs of mitigating potential damages could be disastrous. Cyber insurance is strongly advised.

8. Understand South Dakota v. Wayfair 

The United States Supreme Court upheld South Dakota’s tax legislation last year, requiring out-of-state companies with no physical presence in the state to collect sales tax from customers if their sales exceed $100,000, or 200 transactions. Over 25 states are already enacting similar restrictions, and this judgment could affect practically every private company that sells its products and services outside of the state. The corporation will be required to register and collect sales tax from their customers in all of those states. This will be a huge hardship for small businesses, so make sure you grasp the regulations so you don’t assume your customers’ sales tax liability.

9. Experts should be consulted on a regular basis

 Meet with your consultants at least once a year to go over your business plan, goals, and objectives. All of your consultants want your business to succeed. Working with experts that have experience in your business will provide valuable insights to help your organization grow.