12 Essential Corporate Tax Planning Strategies for Long Term Success

Did you know that taxes go back to the Roman empire in the 1st century A.D? Taxes have changed since then and can be challenging for some. 

As a business owner, it becomes more complicated to understand the various tax laws and regulations. From tax write-offs to due dates, it can feel overwhelming at times.

The good news is that having a corporate tax planning strategy can help. Read this guide for long-term success with these solid corporate tax planning tips today. 

1. Tax Planning Payments

Your corporate tax payment plan needs to include due dates. Ensure you have enough money for taxes and know their due dates. 

If you miss tax payment due dates, it could lead to fines or penalties from the IRS. Write down upcoming payment due dates and abide by them. 

2. Cash Management

Come up with a tax planning strategy to handle your business’s income. This can help you reduce tax payments overall. A tax advisor can help you develop a plan to save the most money through deductions.

3. Understand Changes to Federal and State Taxes

Tax laws can change over time, including global events. While some changes might complicate your taxes, others might ease the tax process. For example, appeal hearings might have been required in the past, but now you might be able to use written responses or phone calls instead. 

To avoid delays, ensure that you have all the required tax information. Ensure you have the correct depreciation schedules for your assets. 

4. Reduce Your Adjusted Gross Income

Research ways to reduce your adjusted gross income. Look at any potential tax deductions. 

A lower adjusted gross income could place you in a lower tax bracket. Ways to reduce your AGI include charitable donations, property taxes, itemized deductions, and contributions to a Health Savings Account. 

5. Use Accountable Plans

Consider expense reimbursements for employees. This could include travel, entertainment, and more.

Use an accountable plan to reimburse employees without reporting them as employee income. If it counts as employee income, you’ll pay more payroll taxes. 

6. Defer Taxable Income

For stronger years, defer income to the follower year. While it won’t remove all taxes, it could help save some money.

You could also prepay some expenses before the year ends. Deferring income is best when you think that tax rates will be lower. 

Another option is to accelerate your income. This is a good option if you think tax rates will increase. 

7. Have a Tax Planner

Don’t wait until tax season since you might miss out on tax-planning strategies. Even if you’re aware of most tax policies, working with a tax planner is still a good idea. If not, the cost of a mistake could mean large penalties and extra taxes. 

Every business has a unique tax situation so a tax planner could help. Before making any serious decisions, discuss them your tax planner.

8. Consider Tax Status Changes

You can operate as a C corporation, LLC, partnership, or sole proprietor if you’re a small business. Your business structure will impact how you’ll file taxes. Changing your status could put you at a lower tax rate. 

9. Have a Retirement Account

You can reduce your taxable income when you contribute or set up a retirement account. When you set up a 401K before the end of the year, you could deduct contributions made to the plan when you file your taxes. 

You might also receive the retirement plan’s startup cost tax credit. 

To qualify, you’ll need to:

  • Have not had an employer-sponsored retirement plan within three years
  • At least one plan member who isn’t a highly-compensated worker
  • 100 or fewer employees who have at least $5,000 in compensation this year

10. Reduce Data Entry and Paper

Many companies are now remote and require less use of paper. Free up time in the tax planning process by going paperless whenever possible. There are payment services and data extraction tools online. 

11. Buy Business Assets Early

Buy assets sooner than later, whether software, office supplies, or equipment. Doing this early can help to reduce your tax burden. 

You’ll also want to ensure you send all correct tax documents to the right address. Verify recipient locations, including multiple collectors. 

12. Use Vehicle Tax Deductions

Deduct vehicle expenses whenever possible. The vehicle can’t exceed 6,000 pounds in unloaded gross weight.

Exceptions include vehicles to transport property or people, hearses, and ambulances. It also includes vans or trucks that qualify as nonpersonal use vehicles.

One standard deduction is Section 179. If you qualify for multiple deductions, you’ll want to see which offers you the most savings. 

There are also mileage deductions. Keep in mind that this rate can change. Miles you drive to and from work from your home don’t count. 

Car expense deductions include: 

  • Gas
  • Oil
  • Tolls
  • Licenses
  • Depreciation
  • Garage rent
  • Insurance
  • Lease payments
  • Parking fees
  • Tires
  • Repairs
  • Registration Fees 

Effective Corporate Tax Planning Strategies

 After exploring this guide on corporate tax planning strategies, you should know where to begin. Take your time deciding how you could save on taxes for your business and get everything completed on time.

Do you wish that you had more time in your day to focus on your business instead of taxes? Or maybe you want to ensure everything is done properly to avoid penalties and extra taxes? 

Then schedule a free consultation today! Schedule a time that works best for you. From bookkeeping to CFO services, we’re your one-stop shop for your business tax needs.