Tax planning services ensure your business complies with tax laws while maximizing every qualifying deduction and credit available. You’ll reduce your tax liabilities while boosting operational efficiency by planning ahead. We’ll explain how tax planning services work, why it’s essential to your SaaS enterprise, and strategies for becoming tax efficient.
What is Tax Planning?
Tax planning services analyze and develop a plan that your SaaS enterprise can utilize to pay the lowest taxes required by law. There are several tax planning strategies your SaaS business can leverage to become tax-efficient at the state and federal levels.
While tax planning can be beneficial for the current year, it is also a long-term strategy for increasing profitability and productivity. Tax planning requires proactive actions throughout the year to qualify for every opportunity to reduce your tax liability.
Related Link: The Best Tax Credits Available Right Now for 2022
Benefits of Strategic Tax Planning for SaaS Businesses
By assessing and analyzing your business’s expenses and incomes, your tax expert can create an effective tax plan to:
Reducing Corporate Tax Liabilities
Your tax planning accountant evaluates and identifies every deduction and credit your company can claim. They’ll create a plan for meeting requirements and advise additional improvements your business can implement throughout the year to be eligible for the full deduction or credit.
By analyzing your agency’s expenses and incomes every quarter or month, your accountant can identify redundancies and inefficiencies in corporate operations, empowering your business to make smarter, real-time decisions about increasing performance. Additional tax breaks may also be found by adjusting operations or expenses to claim maximum benefits.
Increasing Corporate Profitability
Lowering tax liabilities and streamlining operations makes your SaaS enterprise more productive and profitable. As a result, you can grow your business and your wealth. Proper tax planning improves margins and makes SaaS enterprises competitive in today’s crowded marketplace.
Need accounting advice on how to plan for the next tax year? Talk to one of our tax planning experts.
How to Implement a Solid Tax Plan
These are basic things you need to be doing to become tax efficient. Once these things are in place, you can talk to your tax expert about other actions for maximizing deductions and credits:
Bookkeeping is not fun, but it’s critical for claiming specific credits that apply to the SaaS industry, like the R&D Tax Credit. By keeping an accurate accounting of all expenses and incomes, you’ll be able to qualify for all deductions and credits without worrying about IRS scrutiny.
Putting in the work to maintain accurate and organized records will also make it easier for your accountant to identify tax break opportunities. Several reputable accounting software tools are available if you don’t have time or personnel to handle your bookkeeping.
Related Link: How to Easily Pull Top Reports in QuickBooks
Consulting a Certified Public Accountant (CPA)
CPAs that specialize in the technology and SaaS sector are well acquainted with all the deductions and credits that can be applied to your business. And because the government is continually updating its tax code or legislating through Congress, it can be impossible to keep up with it on your own.
Utilizing tax planning services, your CPA’ll notify you about necessary changes and planning initiatives to anticipate any new legislation that can affect your tax filing.
Segmenting Company Expenses
You’ll want to set up your payment system and bookkeeping system to segment all your expenses automatically. Segmenting it will save you and your accountant a lot of time, and your account can easily identify where to allocate those expenses toward your deductions and credits to ensure you maximize your tax savings.
Investing in Research and Development
As a SaaS enterprise, innovation is part of your DNA. You’ll want to claim any activities or expenses that qualify for the R&D Tax Credit. This will require careful bookkeeping to substantiate all expenses.
Offering a Retirement Plan
Retirement plans are an excellent way to reduce your tax burden, and it provides a desirable benefit to you and your employees. It is a welcome tax deduction for startup companies that benefits your business and employees.
Setting Aside Funds for Taxes
Another good habit to get into is to earmark money for future taxes. It’s difficult to do as a startup, but it will save you money in the long run. Many startup companies don’t save enough and must use future earnings to pay past taxes. Putting aside money will save you from this vicious cycle.
Effective Tax Planning Strategies for SaaS Enterprises
While it is best to work with an accountant that specializes in the tech industry to create the optimal tax plan, here are some other tax planning strategies you can implement to reduce your tax liability:
- Offset Payroll with Qualified Research Expenses (QREs): You can offset payroll taxes paid on up to $250,000 in wages. However, your company can’t have more than $5 million in sales from the previous year.
- Deduct New Equipment and Hardware Purchases: All new equipment and hardware purchased during the year can be fully deducted.
- Deduct Startup Costs: If this is your first year as a SaaS startup, you can deduct the first $50,000 of business costs, which would also cover your tax planning costs.
- Turn Losses into Deferred Tax Assets: If you overpaid on your taxes from losses during the year, you could turn them into deferred tax assets for additional tax relief.
Related Link: IRS Announces New R&D Tax Credit Guidelines
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Tax Planning is Critical for Lowering Your Tax Liabilities
Tax planning services will save you significant money in the long run. You can significantly reduce your tax bill by utilizing these strategies properly.
Tax Hack is a tax advisory firm with in-depth expertise in the SaaS technology industry. We help startups and large enterprises maximize their tax savings with strategic tax planning. We also understand the SaaS sector and challenges SaaS startups face.
Get the tax credits your business deserves. Contact us for tax planning advice for technology enterprises.
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