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Why Tax Planning is Important for Small Businesses

Tax compliance is a necessity. An effective tax planning strategy can add considerable value to your business. 

Taxation is a critical factor in the success and financial health of your business, and obtaining tax advice at the earliest stages of your company's development is advisable to prevent early mistakes that can have a lingering detrimental impact. 

Companies should pay attention to tax-related issues in the following areas: 

Registration 

New businesses must, in general, apply for a U.S. Federal ID number. Registration can be affected by applying online with the Internal Revenue Service (IRS). Registration for the following taxes should be considered: 

  • Federal income taxes - 
  • State income taxes – 
  • Employment taxes - 
  • Sales tax (on a state-by-state basis) - 
  • Property tax. 

Depending on the nature of the business, other taxes may also apply. It may also be necessary to register with state regulators to gain the appropriate license or permit to undertake business in that jurisdiction.

Early-stage considerations 

  • Seek early advice on the various taxes for which your company may be liable 
  • Determine how you wish to set up the entity (for example, as a corporation or a pass-through entity) 
  • Consider the taxation consequences of setting up operations or selling products in multiple jurisdictions and states 
  • Determine if your personnel are employees or independent contractors 
  • Consider the tax consequences of non cash remuneration (such as share-based compensation) 
  • Identify possible tax credits and incentives for which your company may qualify 
  • Obtain external tax advice before any acquisition or disposal

Compliance 

  • Ensure someone is responsible for tax compliance; this is an area where an external accountant or CPA may be of particular assistance
  • Tax returns and payments of different tax types are due at various times of the year; ensure you understand the required tax filings and the associated payment calendar 
  • Incorporate tax charges and payments into your budgets and financial projections 
  • Timely withholding and remittance of employment taxes (federal and state) are critical to ensure compliance

KPMG Spark helps you be tax compliant

The tax preparers at KPMG Spark provide support and not just during tax season. You’ll have year-round support, and guidance from accountants dedicated to your small business’ success. From compliance issues to missed deductions and credits, you don’t have to tackle your tax preparation on your own. Contact KPMG Spark today and visit with an accounting specialist dedicated to your small to medium-sized business success and tax preparation.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP.

This blog article is not intended to address or provide advice concerning the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services.

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.

The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

KPMG LLP does not provide legal services.

KPMG SparkJuly 27, 2022Posted In: Tax Tips

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