How a Stronger Year Could Change Your Business Tax Strategy

Say you run a small HVAC company in Fort Worth. For three years, you've cleared a comfortable but unremarkable profit. This year, you land a few commercial contracts, hire two techs, and finish well ahead of where you thought you'd be.

Great news. But your tax setup was built for the smaller version of your business, and it may not hold up anymore.

We see this a lot at Andrea Ward CPA. Owners spend the year working hard and growing, then find out in March what it did to their tax bill. By March, many of the decisions that could have affected that bill are already behind them.

The October Problem

Once the year closes, the big decisions are made. Equipment is bought or it isn't. Retirement contributions are made or they aren't. Your payroll is what it is.

If you sit down with your numbers now, with a couple of months left, you can still make informed decisions. Maybe that's buying the truck you were going to buy in January anyway. Maybe it's funding a retirement plan or reviewing how much you pay yourself.



Or maybe you find out you're fine and don't need to make any major changes. That's useful too.

The point is knowing where you stand before the year is over.

Your Books Might Be Hiding Deductions

Growth means spending. New hires, new equipment, more advertising, a bigger space, maybe a lawyer or consultant you wouldn't have needed before.



Those costs can affect your taxable income, but only if they're recorded and handled correctly. And a clean set of books isn't necessarily the same thing as a complete tax picture.

We've seen well-organized accounting files where a major purchase was categorized incorrectly or a potential deduction wasn't identified. The software doesn't know what you didn't tell it.

After a strong year, have someone take a closer look at how your income and expenses were categorized and whether anything important needs attention before the year closes.

Is Your Entity Still the Right One?

LLC, S corp, C corp, partnership. Each one is taxed differently, and each changes how owners take money out of the business. A setup that worked fine at $60,000 in profit can look very different at $250,000.



That doesn't mean you should switch. Plenty of owners run the numbers and stay right where they are. But the structure you picked years ago was chosen for the business you had then, so it's worth checking it against the one you have now.

Check Your Quarterly Payments

If your income used to be modest, your estimated tax payments may have been based on those earlier numbers.



Then the year goes well, your income climbs, and those payments fall behind what you'll ultimately owe. That's how business owners can end up facing a much larger tax bill when the return is prepared, along with potential underpayment penalties depending on their circumstances.

The fix starts with looking at the numbers.

Compare what you've earned so far with what you expect to earn for the full year and see whether your estimated payments still make sense. October is a much better time to find out than April.

What Should You Ask Yourself?

Most owners ask one question: How much do I owe?

Try a few more:

• How much taxable income is the business really producing?
• Are we claiming the deductions we're entitled to claim?
• Do my estimated payments still make sense?
• Does my entity type still fit the business?
• What major purchases are coming?
• How does my compensation affect the overall picture?
• What decisions need to be made before the year ends?

You don't need perfect answers to all of these. Even rough answers can tell you whether it's time to have a conversation with your CPA.

Don't Wait for Tax Season

By the time your return gets prepared, the year is over and most of your choices are already made. If this year is running ahead of where you thought it would be, it's worth looking at the numbers now, while you can still change something.



If you own a business in Fort Worth, Andrea Ward CPA is happy to go through your year-to-date figures with you and talk about what makes sense before December.

Schedule a consultation today!