When you own a business, tax planning helps you make sure that you don’t end up depleting your business’s cash reserves to pay its tax bill. If your business doesn’t have cash reserves, that tax bill could put you in an even worse position paying your taxes back late results in costly penalties. You can make sure that your business’s income tax doesn’t catch you unprepared by saving a certain percentage of your business’s revenue every year, starting with 10 to 15% for the first year. Put this money into a separate savings account every month, and don’t withdraw from the account for any reason. Depending on how much money your business makes, that 10 to 15% may cover your tax bill, or it may not be enough. If it isn’t enough, you can start saving more. If you have extra money left over after paying your taxes, keep it in the account and save it for next year. An alternate option to saving throughout the entire year is to pay your taxes in quarterly instalments. The due dates for instalment payments are March 15, June 15, September 15, and December 15. With this method, you don’t need to worry about getting hit with a large tax bill; instead, you can make smaller payments throughout the year. Being able to pay your business’s entire tax bill when it’s due is important to avoid penalties. Prepare for that tax bill by saving consistently throughout the year, or avoid it altogether by paying your taxes in smaller instalments.
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.