Tax planning is the process of looking at various tax options to determine when, whether, and how to conduct business and personal transactions to reduce or eliminate tax liability. Many small business owners ignore tax planning. They don’t even think about their taxes until it’s time to meet with their accountants, but tax planning is an ongoing process, and good tax advice is a valuable commodity. It is to your benefit to review your income and expenses monthly and meet with your CPA or tax advisor quarterly to analyze how you can take full advantage of the provisions, credits, and deductions that are legally available to you. Tax Planning Strategies Countless tax planning strategies are available to small business owners. Some tax strategies target the owner’s individual tax situation, and some target the business itself. Regardless of how simple or how complex a tax strategy is; however, it will be based on structuring the tax strategy 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’ll need to estimate your personal and business income for the next few years. Many tax planning strategies will save tax dollars at one income level but 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. 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.