As a construction contractor, you probably have multiple obligations to pay taxes both from an individual perspective and from the perspective of your business. Keeping track of the best ways to implement proper tax planning techniques can save you a lot of headaches and ensure that there are no nasty surprises come tax time next year. While many people primarily focus on taxes during the first quarter of the year, now is actually the best time to get your tax planning in order. Understanding your responsibilities and possible benefits from making some changes in your planning for your business structure that allow you maximum savings and reduced time invested when your next tax obligation is due.
Here are some of the best tips for accomplishing better tax planning for your construction contracting business this year:
Hire an Accountant
Having someone on hand who is knowledgeable about your industry and the possible taxes associated with it gives you the best resource for tax planning. Your CPA is in fact the key tool allowing you to keep more of what you make. Your accountant can tell you how to set aside the right amount of money so you can pay your taxes on a quarterly basis. One common issue for construction contractors is that their income can evolve based on the season or even year-to-year. Working with an account help to understand these patterns and changes in order to plan for them appropriately.
Understand What Impacts Tax Obligations
There are many different factors that influence your obligation to pay taxes. You are likely to pay higher taxes if you are single, have limited deductions, make a significant amount of money from your contracted work, and if you live in a state with high income taxes. Several of the most common ways to reduce your tax obligation is to own a home, have children, get married, or have very high business expenses that can help to reduce your profits.
Your accountant will most likely suggest this, but paying your taxes on a quarterly basis reduces the chances that you would be forced to face a penalty for underpaying estimated taxes in the prior year. It’s very easy to get set up for paying quarterly estimated taxes, and it forces you to be more in tune with the various ebbs and flows of your business cycle over the course of the year. Each quarter, you would need to sit down and evaluate your various obligations in the taxes owed to the government. Ultimately, it’s much easier to make these payments on a quarterly basis rather than being surprised with a large annual lump sum.