Taxes

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PERSONAL TAXES

Personal income tax is collected from individuals or entities. When you file your tax return annually on or before the April filing deadline, you are reconciling the amount of taxes you have paid and any additions, credits, and deductions. Personal income tax is generally paid yearly based on earnings and employment status. Your employer withholds taxes from each paycheck and sends it to the Department of Taxes. If you are self-employed, you must pay your taxes to the Department, usually quarterly.

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BUSINESS TAXES

At the owner’s tax situation and some at the business itself. Still, regardless of how simple or how complex a tax strategy is, it will be based on structuring the system to accomplish one or more of these often overlapping goals:

• Reducing the amount of taxable income
•  Lowering your tax rate
•  Controlling the time when the tax must be paid
•  Claiming any available tax credits and deductions
•  Controlling the effects of the Alternative Minimum Tax
•  Avoiding the most common tax planning mistakes

To plan effectively, you must estimate your personal and business income for the next few years. This is necessary because many tax planning strategies will save tax dollars at one income level and create a larger tax bill at other income levels. You will want to avoid having the “right” tax plan made “wrong” by erroneous income projections. Once you know your approximate income, you can take the next step: estimating your tax bracket.

The effort to come up with crystal-ball estimates may be complex and inexact by its very nature. On the other hand, you should already be projecting your sales revenues, income, and cash flow for general business planning purposes. The better your estimates are, the better the odds that your tax planning efforts will succeed.