Understanding your tax liability during the fourth quarter

October is here, and with it comes the fourth quarter and some of the most significant decisions of the year regarding your business and its cash flow.

Many business owners don’t take this important period seriously, though, and they end up surprised when tax season takes a bite out of their cash flow. Don’t be caught unaware! Get the insight upfront from your cash flow specialist.

 

What is my estimated tax liability for the current tax year?

This is a great question for your CPA! The fourth quarter is an important time to reconcile owner distributions and owner W-2 wages to make sure the proper payroll taxes have been accounted for. Understanding this will allow you to set aside money in your cash flow strategy in preparation for tax season. Talk with your CPA about your company’s tax liabilities for 2018 rather than waiting until next April when you are caught off guard and told you owe this much to the government. Discussing taxes now can save your business from a huge cash flow headache later.

Tip: Really good CPAs will issue quarterly tax estimates when they complete your tax return in the current year. The review in October should just be to make sure that you’re on track and fully aware of how much money you owe on Tax Day. Even if you haven’t met with you CPA this year, it’s never too late to get together and get a handle on what your tax liabilities will be so that you can plan out your cash reserves should you still owe money when you file in April!

 

What strategies can my business implement to reduce my tax liability?

Rather than sending all your profits to Uncle Sam, one way to reduce your tax liability is to invest back into your company!

Some options to consider include paying an extra month’s rent, adding a Profit Sharing component to your 401K plan, adding a Captive Insurance Plan, or purchasing some updated equipment. When you reinvest in your company or employees, that money helps to reduce tax liabilities as well as get more money into your pocket.

Be aware that retirement and similar plans cannot be done at the last minute come December. It’s important to meet with a wealth management company or financial planner now to get started before the end of the year.

Note: Paying off debt does not help reduce your taxable liability, but it’s a good thing keep in mind. Consider debt reduction if you have extra money at the end of the year because in the big picture, reducing your liability is always a good thing from a business owner’s perspective.

Of course, your strategies regarding taxes can’t always be about trying to avoid taxes! You need to pay attention to your cash flow and always ensure that you’re going to have enough cash to start off the new year. If you spend it to reduce your taxable income, you want to make sure that you have enough cash on hand to keep things moving next year!

Cash flow consultants, like me, take a deep dive into your books and strategize ways to limit liability, offset debt, increase profits and keep your cash flowing. Following a review of your financials, I provide you with the tools and education needed to feel totally empowered while making informed business decisions regarding your company’s cash flow.

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Thank you for your support!

The annual Light the Night Walk was a great success this year, and I wanted to personally thank you for sharing your time and attention to this incredibly important cause.

This year, we raised $36,207, making Patti’s Team one of the top fundraising groups in the category of Family and Friends Teams for another year! We are on track for hitting our goal of raising $1.5 Million for the Denver walk this year! The support of family, friends, and the community continues to help fund lifesaving research.

Even if you weren’t able to make it out, it’s not too late to donate if you would like to help find a cure for blood cancers. Click here to add your contribution.

Thank you again, from the bottom of my heart!

 

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With me on your team, you’ll get an accurate understanding of the financial health of your business and learn empowering, forward-looking cash flow strategies. Interested in learning more? Contact me now.

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