Tax Planning

It’s become popular to call the period from January 31st to April 15th the “tax season.” But for many businesses, financial and tax experts agree, it’s best to keep taxes in mind all year round.

“You need to be aware of taxes all of the time,” said Brad Benesh, senior vice president of business banking for Twin Cities-based North American Banking Company. “You have quarterly estimated taxes, sales taxes, payroll taxes – they’re year-round. As for annual tax filings, the sharpest people are preparing in advance.”

As a banker, Benesh views himself as part of the team that each client builds to help them succeed in business and in specific areas, such as taxes. Along with accountants, legal experts and consultants that vary by industry, bankers help businesses invest in and use their resources intelligently.

Why a banker is important for tax preparation

Bankers help businesses activate their tax strategies. “An accountant can sit down with a business and help them figure out how to improve their tax situation,” said Benesh. This might include purchasing equipment for a business, or real estate; all or part of the cost of these may be deducted from a company’s taxable income, effectively reducing the business’ tax liability.

For major purchases, a loan or line of credit from a bank may be needed. That’s where planning ahead is important: If you need financing to make that purchase or investment, you want to give yourself plenty of time to get the loan in place before the tax deadline.

Another time to call your banker is when an unexpected tax bill hits. A successful year might mean a big tax bill, but a company might not have the cash on hand to pay taxes if they had to increase payroll or buy real estate or equipment because of their success. This can be a problem if it causes the business to fall behind on taxes.

By coordinating with an accounting expert and a banker, a business can secure a loan from a bank to cover taxes until revenues can catch up, allowing them to emerge from these crunch times stronger than before.

Steps to consider for year-round tax planning:

• Keep accurate records of all income and expenses throughout the year.
• Consider hiring a tax professional to help with tax planning and preparation.
• Make estimated tax payments throughout the year to avoid penalties and interest.
• Stay up to date on changes in tax laws that may affect your business.
• Take advantage of tax deductions and credits that are available for small businesses.
• Review your business structure and consider whether changing it may help reduce your tax liability.
• Keep good communication with your accountant or tax preparer to ensure they have all necessary information to file your taxes accurately.
• Don't wait until the last minute to start planning for taxes. Stay organized and proactive throughout the year to minimize stress and maximize savings.