What is tax planning? Tax planning is the process of reviewing your financials and preparing for the tax season ahead before it arrives. So often, accountants get caught up in their work and don’t have time to work with their clients on next year’s taxes, so they result in year-end tax planning. This leaves the client to tax plan for themselves which can be great, but it can also lead to mistakes. We’re going to discuss the tax planning mistakes you should avoid so you’ll create less stress for yourself and your CPA.  

The Wrong Amount of Cash in the Bank 

One crucial mistake you need to avoid in tax planning is having the wrong amount of cash in the bank. You should always be aware of what is or isn’t in your bank account. This way you can plan accordingly for investments, expenses, income, or any other financials. Not having enough money in the bank can hurt your business but having too much can as well. 

Lack of Cash Flow Planning 

We’re not the first to admit that cash flow planning can be difficult for a business. You don’t always know when a client is going to pay their bill or if they’re going to pay at all. However, once that money does reach your account, you need to be strategic in planning where it will go or what it will be spent on. Without careful planning, you could find your account being overdrawn when a client doesn’t pay you when you expected. This leaves you wondering how you’ll pay your rent for the office space or how you’ll run payroll. Cash flow planning is important for your organization and should not be overlooked.  

Not Tracking Expenses in Time 

Not tracking your expenses can leave you with problems when it comes to your taxes. Why? Because you’re missing out on tax deductions or tax credits that you could have earned had you tracked your expenses for the whole year. Business owners tend to procrastinate and leave tracking expenses for right before the tax deadline, but you should avoid this. By avoiding it, you could lower your tax liability or receive a larger refund on your return.  

Lack of Preparation Before Meeting Your CPA - Not Preparing Before You Meet with Your CPA 

Not preparing before a meeting with your CPA can hurt you and your CPA. It could become a waste of time for your CPA, and you’ll leave having more questions than you started with. The smartest thing to do is come ready with your financials and your questions, so you have a plan for the meeting. Your CPA will appreciate you coming prepared, and both of you can spend the time of the meeting being productive with tax planning rather than trying to get organized.  

Not Taking Advantage of Available Resources (Chance to sell in the article, closing point) 

There are many tax resources out there that can help answer your questions or keep your information organized. If you are stressed about your taxes or are concerned with keeping track of your documents, look up what kind of resources are out there. BaCo Group would be a great resource for you if you are concerned about those things. Our CPAs would be happy to sit down with you and answer your questions, and we have unique, patented technology that keeps track of your information, so you don’t have to. Our software updates every night throughout the year, so you don’t have to keep your documents from 2020 until the end of 2021. We work on 2021 taxes in 2021. If you’re looking for resources to help you with tax planning, BaCo Group is the CPA firm for you. Contact us today to learn more about the various services we offer our clients! 

Tips for Year-End Tax Planning 

Year-end tax planning is important for small business owners because it can reduce their income tax liability and allow them to keep more of the money they’ve earned. Here are a few strategies for tax planning that you can get a head start on to prepare for the next tax season.  

Bonus Depreciation 

According to the standard tax code, you’re required to depreciate your equipment over the time of its useful life. Bonus depreciation allows you to write off 100% of those costs on your 2021 return. However, a couple of things to keep in mind are 1) buildings and their structural components are not eligible and 2) the equipment must be “placed in service” meaning you must actually start using it before December 31st. 

Manage Income and Expenses 

Most small business owners use cash basis accounting for tax purposes which becomes beneficial when it comes to tax planning. The cash method allows you to recognize income when cash is received, and recognize expenses once they are paid. The goal for cash basis is to accelerate deductions and defer income. By doing so, you can lower your tax bill.  

Here’s an example for expenses: you’re sending a handful of your employees to a conference in February 2022 and weren’t expecting to pay until January 2022. But you pay for the expenses in December 2021, you claim the expenses for 2021 and reduce your 2021 tax liability. 

For income, let’s say you’re expecting payment from a client for a project in December 2021 this year, but you haven’t sent out the invoice yet. You can send the invoice in January 2022, receive payment in 2022, and not have to claim the income for 2021. 

Lowering your taxable income enough may change your tax bracket, meaning you will owe less. It may also lower your self-employment tax.  

Invest in Retirement 

Setting up workplace retirement accounts comes with a few tax benefits from the SECURE Act that you may not know about. One is that small businesses may claim up to $5,000 of tax credit each year for three years to offset the set-up costs of the plan. Another benefit is a possible tax credit for the business of $500 per year for three years if the business includes an auto-enrollment feature in its plans. However, there are a few stipulations in order to qualify for the $5,000 credit. The business must have: 

• 100 or fewer employees who received at least $5,000 in compensation during the prior year, 
• At least one plan participant who isn’t a highly compensated employee, and 
• A roster of employees who didn’t participate in a prior retirement plan offered by your business in the past three years 

If you qualify for these credits, that’s $5,500 per year for three years! 

BaCo Group and Tax Planning 

Tax planning can be hard. Businesses and individuals are unique, and each tax situation is different. However, with the help of a CPA like those at BaCo Group, tax planning will be a breeze and your return will be easier than ever! We take pride in being able to help our clients with a tax plan for their businesses because we feel it’s important for the financial health of the business. Contact us to set up an appointment and start tax planning today. 

Tax Planning for Businesses 

If you’ve worked with a CPA at any point, you’ve probably heard of or been approached about Tax Planning. Tax planning is defined by Investopedia as, “the analysis of a financial situation or plan to ensure that all elements work together to allow you to pay the lowest taxes possible. A plan that minimizes how much you pay in taxes is referred to as tax efficient.” In short, tax planning is preparing your documents and essential information in advance to the tax deadline. By “in advance” we mean a few months before the deadline, not a few days or weeks. We know this sounds tedious and you, as a business owner, have a lot of other things to worry about. The truth of the matter is you will always have a lot to worry about, and if you’re not ready by the time the deadline rolls around, you’ll be a lot more stressed than if you’d just tax planned a few months ago.  

Aside from saving yourself stress later, you’re probably wondering why you should consider tax planning. Here are a few of the benefits of tax planning for businesses.  

Save Yourself Time and Error 

By having an efficient tax strategy, you will avoid wasting time scrambling for documents near the deadline. How? You’ve already collected your documents, you know relatively how much you owe, and you know what purchases you can and can’t make. These are all things you don’t have to worry about during the busy season when you have a tax plan in place.  

Additionally, you’ll avoid all common errors that occur when hurrying to put together a return. Some errors you’ll avoid by utilizing a tax plan are the following: 

• Spending more than you should to increase potential deductions 
• Making expensive purchases when you shouldn’t 
• And not understanding your business’ tax liability 

With tax planning, you’ll be aware of where you stand regarding your taxes and finances, saving you time and error when the deadline approaches.  

Reduce Tax Liability 

As a business owner, you want to pay what you owe in taxes, but not a penny more. Tax planning will get you there. If you start tax planning 4 months before the deadline, you have the time to speak with your CPA about all the deductions possible for your business. If you don’t plan, your CPA can’t give you that time because you two are focused on filing your return on time. Furthermore, taking your time with your taxes allows you and your CPA to file your taxes correctly thereby avoiding costly fees for noncompliance.  

Enable Growth 

We’ll say it again, tax planning saves you money. That means all of that “extra money” can be funneled into other aspects of your business that will help it grow such as marketing, new employees, upgrading your systems, etc. Creating a tax plan also continuously teaches you about your finances, making you aware of what’s available, how you can invest in your business, and more. Growing your financial knowledge helps you grow your business.  

Do I Need a Tax Plan? 

Tax laws have changed a lot and they’ve been changing, so a tax plan is necessary to plan for what’s to come. Tax planning allows you to easily adjust when laws change instead of stressing about how much you owe when the laws change, and the deadline comes around. Furthermore, a tax plan is a critical part of your financial strategy because it factors into how much you owe, how much money you have, what you can spend, etc. We recommend you partner with a CPA like those at BaCo Group to start tax planning today. Starting is the first step to getting ahead, reducing how much you owe, and growing your business.  

How do we Tax Plan at BaCo Group? 

Oftentimes CPA firms offer tax plans as a special service done in addition to their normal tax prep work. This is because most CPA firms operate by looking backward, i.e., they spend this year filing last year’s returns. At BaCo Group, we operate off a current year model, doing tax returns in real-time. How? We utilize technology that gathers your data for you automatically and delivers it in real-time, so we are then able to plan year-round. Instead of spending the year preparing last year’s returns to go out the door, we spend the year planning for this year with you and your company, real-time. Tax planning is not a specialty service done after we prep your tax returns, it’s our main path towards delivering you real-time services, all while ensuring your return is prepared to be filed on time when the deadline occurs. 

If you are ready to take advantage of a real-time tax plan that takes the burdens of gathering and delivering data off you and gives you a better understanding of where your company sits year-round, contact us today. 

You’ve just finished filing your taxes, and now you’re wondering what the next step is financially. Oftentimes, accountants spend a lot of time working on your tax return which leaves them very little time to help you plan and prepare for what’s coming next. This leaves you with a lot of questions. So, what is next? Here are a few things to think about once you’ve finished your tax returns.  

Are You Planning to Sell Your Business? 

This is a very important question because selling your business requires planning. There are a handful of things you need to do in preparation for selling your business, but a CPA can help you with a few of those tasks. That’s why it’s crucial you communicate this idea with your CPA so they can begin to think about what they need to do to help you in the process.  

The first thing to be accomplished would be getting your business valuation. You need to know how much your business is worth to sell it, so an accountant will help you figure that out. They can also assist you in organizing and structuring your deal. There are different ways a deal can be structured, so having a CPA help you will make you feel more confident in what you’ve come up with.  

Selling your business also comes with a new set of tax implications. Filing your business taxes might have been hard, but this is a different set of rules. Having a qualified CPA help you with this is crucial to the successful sale of your business. You’ll spend a lot of time looking through your potential buyer’s company and portfolio as well because you want to make sure they’re a valuable person or company to sell to. An accountant will help you look through this and evaluate the risk of this potential buyer.  

Additionally, no matter what you’re doing after you sell your business, you’ll want help planning for that. A CPA firm can assist you in drawing out your plan and preparing for it financially. Having a CPA at your side when planning to sell your business is extremely valuable and should not be dismissed. 

Planning Now Instead of Later 

As we mentioned before, CPAs tend to wait until the last minute to help you plan. BaCo works differently. With our patented technology, we’re able to spend less time on your tax returns and more time planning and preparing with you, but not at the expense of quality. Your tax returns are filed efficiently and accurately, so both of us can rest knowing that’s done and look ahead.  

Most CPA’s wait, but we want to talk to you now about planning and preparing. We have the time, and we want to prioritize your business. That’s why we offer a wide variety of services from concierge accounting to tax planning and preparation. We do it all with time to spare so that you don’t have to worry about what to do next. We’re right there with you all year. You can take advantage of the many services we offer because we’re not tied down with your returns for 3 months. We want to help you and your business be successful which is why we do more than just your tax returns.  

Opportunities to Help You in Other Ways 

Our services don’t stop at concierge accounting and planning. BaCo Group can do more to help your business be successful. We are problem solvers. When your company runs into a problem, our systems help us come up with a solution. We work hard to make sure your problems are fixed so your business can operate smoothly. And if you have common problems, we create a common solution so fixing it is quicker than ever.  

We also have reporting services. We do current income tax reporting, financial reporting, and automatic consolidated or combined reporting. Many clients that we work with have multiple companies or entities and keeping up with the accounting for each can be difficult. That’s why we created our technology with the ability to automate the consolidation which allows to take a holistic approach for you and each of your business, regardless of the accounting packages they run on. These services give you the ability to expand your network which is why we’re excited for you to dive in and discover what we have to offer.  

If you’re interested in our other services and you want us to do more to make your company as successful as it can be, reach out to us today! We’d love to give you more information about what we can do for you as a client and discuss how you want to utilize our services.  

Tax season has come and gone. You’ve filed your 2020 taxes, but chances are you’re not even close to prepared for 2021 taxes. CPAs are often so busy preparing last year’s taxes this year, that they don’t have time to help you, their client, with this year. This has become a mainstream problem in the accounting industry, unfortunately. However, BaCo has mastered the tax process with our unique technology, BaCo Tech, so we’re able to provide our clients with a multitude of services throughout the year instead of just focusing on their tax returns during “tax season.” We can create year-round tax plans for our clients that are proactive rather than reactive. Here are some of the reasons you need a proactive, year-round tax plan. 

Month-to-Month Tax Projections 

BaCo Tech is designed to sync with the software you use for your books, so your information is automatically uploaded to the system each day. With this, our CPAs can gather your numbers together and do anything they need to give you information you may have never had from any other CPA before. One of the things we’re able to do is provide your business with month-to-month tax projections. For all 12 months, we can project what your tax numbers will be so you can be more prepared for what you owe and eliminate year end surprises.  

Planning While Still in the Year 

With a proactive, year-round tax plan, you’re able to plan ahead, not just in the last couple months of the year after tax season. This is important because financials are important for any business. A famous adage from Benjamin Franklin says “failing to plan is planning to fail” and this is especially true for business owners. Struggling to plan for the next year, or starting a plan too late, set’s you up for failure. Our CPAs at BaCo can give you the information you need to plan for your year while you’re still in it. Whether that’s planning for taxes, debt, or payroll, you can do all of it as you go instead of at the end of the year.  

Different Planning Opportunities 

Having said all of this, you can see that there are many planning opportunities for your business when you work with BaCo. Many CPA firms do their planning with you in October or November when tax season is wrapping up and they’ve finished focusing on last year’s numbers. We are able to start planning with you year round, when you need it, which is far better than starting in October when it’s 90 days before the new year comes around. 

Trailing 12 Report 

Trailing 12 months (TTM) is a term used to describe the past 12 consecutive months of a company’s performance data. This method of accounting has many benefits to it including helping one report financial figures. BaCo Group creates trailing 12’s for our clients because of the benefits it offers. One benefit is that it tracks your performance. It gives you the ability to look at your trend over the past twelve months and evaluate it. TTM is helpful when it comes to spending. You’re able to track your spending over the last 12 months and evaluate your progress such as where your money is going, how much you’re spending, and how often. Then you can set up a plan to improve your spending if need be. TTM allows you to see your cash flow as well. Similar to tracking, you can see where your cash flow rises and falls and determine the factors affecting it allowing you to plan for future cash flow trends. Overall, the TTM has been proven useful for our clients, and we believe it would be useful for you too.  

BaCo Group has a unique way of doing things that’s different than any other CPA firm. If you want to see what this new process can do for your business, contact us about more information. We’d love to sit down with you in-person or virtually to discuss what services would be right for you and your business.