“In order to be successful in the new year, stay focused, develop a positive attitude, and be passionate with your dreams.” -Bamigboye Olurotimi
It is only a matter of days before 2021 officially comes to an end. With this in mind, we here at North Georgia Tax Solutions think it is incredibly important to use this time to prepare for 2022. Last month, we created an End of Year Checklist to help prepare your business for the next year.
But what about planning for taxes? Streamlining your business when it comes to licenses, intellectual properties, or corporate compliance is one thing; but year-end tax planning is an entirely different beast to tackle.
Luckily, experts at North Georgia Tax Solutions have outlined a few different high-level approaches to ensure you get the most out of your year-end tax plan!
Tax Planning: Why do we do it?
The main goal is to minimize taxes. With potential legislation changes looming, it’s pertinent to pinpoint and effectively analyze your goals to create a personalized plan for your specific needs. The Build Back Better Act is an example of legislation which was passed by the House of Representatives on November 19th. The certainty of the bill being passed this year is not entirely clear, however, it serves as a great example of what to look out for when conducting your year-end tax plan.
This act, for example, would impose a new 2-stage income tax surcharge on high income taxpayers. These taxpayers are outlined by income thresholds and will have major effects on how those who fall within these thresholds are taxed. Business provisions have also been put into place within the bill to ensure that large corporations cannot avoid paying taxes. You can read more about the Build Back Better Act and its tax implications here!
The Infrastructure Investment and Jobs Act, the $1.2 trillion bill passed on November 5th, will also have implications on how you plan for your taxes. There are new reporting requirements for cryptocurrency brokers, infrastructure related tax changes, and tax procedure changes for those affected by federally declared disasters and those who are serving in a combat zone.
Even those who are not affected by new legislation should certainly be aware of new and in-limbo tax laws so they can properly plan for their taxes.
Minimizing Your Taxes:
The general rule of thumb for year-end tax planning is that in order to decrease taxes you must reduce the amount of income received or increase your amount of deductions. Depending on the taxpayer, this rule may change when there are legislation adjustments, such as the Build Back Better Act, which is why as we mentioned, it’s crucial to stay up to date with tax laws!
- Reducing income can be done several ways. Postponing revenue, donating to charitable organizations, contributing significant amounts to retirement and/or savings plans, and examining the potential sales of investment or capital items are all methods to reduce income and minimize your taxes.
- Paying your expenses before the end of the calendar year is another way to reduce your taxable income. Remember, even if your credit card expenses are not billed until 2022, all payments made in 2021 will count as a 2021 expense on that credit card.
- If your income is lower this year, and you expect it to go up next year, push for more revenue before the year ends. Then, focus on paying expenses next year, in 2022.
- No matter your goals for your tax plan, it’s essential to check that all withholding and estimated tax payments are accurate.
Of course, every year-end tax plan is dependent on both current and future legislation, your yearly income, business type and size, your tax bracket, among many other factors. But following these tips can help you save money and minimize taxes as you plan during this final calendar month. We have also provided our readers with more information from our own research software, which can be found on a PDF here.
End of year tax planning is essential to getting the most out of your hard work throughout the year. Contact a professional for help! North Georgia Tax Solutions knows how to form personalized and expertly crafted year-end tax strategies to meet any goals you may have.