Tax Planning Strategies for Marketing Agencies

Imagine you tried to do your taxes for your new business, but you messed up significantly. Now, you have to rush to fix the errors so that you don’t face penalties from the IRS.

New and existing marketing agencies can benefit from a few tax planning strategies. Taxes don’t have to be stressful, but you do need to do them correctly.

Keep reading to learn some strategies as you plan for taxes.

Choose the Best Business Structure

One of the most vital tax planning strategies for marketing agencies is to choose the right business structure. If you’re the only employee in your marketing business, you may want to operate as a sole proprietor.

You can also form a limited liability company (LLC) if you work by yourself or have a business partner. Both business structures operate similarly when it comes to taxes because you will pay taxes on your personal return.

If you choose to form a corporation, you will need to file taxes yourself and for the businesses. Corporations can require more complex tax planning strategies than other structures, so consider if you want to deal with complex taxes.

Track Every Transaction

When planning for taxes for your marketing firm, track every transaction that comes through. Be sure to track all payments from clients and any other sales you make as income.

You should also keep track of everything you spend money on for the business. That way, you can know how much of your revenue is profit, and you can prepare for tax season.

Track the transactions in your accounting software, and keep a copy of every receipt. When you go to file your taxes, you will have everything ready that you need to report when filing.

If you track transactions as they happen, you can save time at the end of the year. Then, you won’t need to spend as much time working on your taxes before you can file them.

Pay Taxes Quarterly

Marketing agencies should also pay taxes quarterly to avoid a big penalty at the end of the year. If you’re a sole proprietor and don’t have employees, you will only need to pay taxes on your income.

However, when you have employees, you will also need to pay for things like payroll taxes. You’ll need to pay those at regular intervals as well, so don’t wait until the end of the year.

Consult with an accountant or bookkeeper on how to pay your taxes. Many people can use an electronic system to pay the IRS, but you can also send a check in the mail if you prefer.

Understand What You Can Deduct

When tax planning for a small business, consider some business tax deductions. You can deduct quite a lot of expenses, such as the cost of your website or office space.

If you spend money on something for your business, you’ll probably be able to deduct the cost. Then, you can help save money on your taxes.

Knowing what you can deduct may also help you decide what supplies to buy. While you still need to bring in profit, you can decide to buy more of something to help grow the business while lowering your tax liability.

Be Strategic About When to Buy

When it comes to making business purchases, marketing agencies should be strategic. For example, you may want to wait until the end of a quarter or year to buy something.

That way, you can deduct the cost from that year or quarter. Many companies and people will make charitable donations at the end of the year to save money on their tax bill.

When you have a digital marketing company, you can make qualifying purchases toward the end of a tax period. Then, you can make sure you’ll bring in a profit while also taking advantage of tax deductions.

Start Planning for Taxes Early

If you want to make tax planning easy, you should start the process as early as you can. It may be tempting to wait until the last few weeks before the tax deadline to plan.

However, that can make you feel like you have to rush to get everything in one time. You may also find it much harder to find a good tax professional who has room in their schedule to help you.

Give yourself at least a couple of months to find an accountant or tax advisor. You’ll also have time to organize your receipts and other documents to make filing taxes seamless.

Automate What You Can

Another one of the best tax planning strategies for marketing agencies is to automate as much as you can. For example, maybe you switch to accounting software that you can connect to your business bank account.

Then, the software will be able to input transaction data for you. All you have to do is review the transactions to make sure they’re accurate and that you aren’t missing money.

You can also set up automatic bill payments for website hosting and other subscriptions. Then, you won’t forget to pay those, and your accounting software can record the transaction.

Work With a Professional

Tax planning can be very overwhelming, especially if you’re new in business. To make things easier, work with a tax professional, such as a tax advisor or accountant.

The professional can go over your taxes with you and answer any questions you have. If you miss any tax deductions, a professional might catch that to help you lower your tax bill.

Plus, you can work with the professional throughout the year to prepare for the next round of taxes. Then, you won’t have to stress as much about them next year.

Tax Planning Strategies Can Help Marketing Agencies

The right tax planning strategies can help marketing agencies avoid making mistakes. That way, you’ll be able to avoid penalties, so you can keep your business running for the next year.

Be sure to start planning early, and keep good records of your transactions. Give yourself time to organize everything so that you don’t miss essential details.

If you want even more help, learn about our tax planning services to make sure your taxes are in order.