How To Do Tax Planning To Pay Less Taxes

How to use tax planning to reduce your taxes legally and responsibly. Practical and effective tips for paying taxes.

Taxes are a heavy burden for SMEs and the self-employed, so it’s essential to minimize their impact through tax planning.

• Learn how to implement effective tax planning to reduce your tax burden legally and ethically.
• We’ll share some decisions that affect the taxation of businesses and self-employed individuals so you can consider them in your tax planning.

Tax planning is a strategy aimed at reducing your tax burden within the law. Taking full advantage of available deductions, exemptions, and tax credits can make a significant difference in the amount of tax you owe.

Far from being an evasive or illegal strategy, tax planning consists of taking full advantage of the tax benefits permitted by law to legitimately reduce tax payments.

Once companies have settled their corporate tax and self-employed workers have paid their personal income tax, there’s no need to delay tax planning for next year any longer. Every month that passes diminishes our ability to maneuver when it comes to  reducing next year’s tax bill.

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What is tax planning?

Tax planning is  a set of measures aimed at reducing the tax burden within the current legal framework. It involves postponing, preventing, avoiding, or minimizing certain tax burdens for taxpayers.

To carry out tax planning, the first step is to analyze an individual’s or company’s financial situation. This will allow you to identify opportunities to minimize your tax burden within the legal framework . This requires understanding the tax regulations for the different taxes that may affect you, knowing how to identify applicable deductions and benefits, and implementing appropriate strategies to reduce your tax bill.

Tips for your tax planning

To carry out effective tax planning, it is advisable to follow these steps:

1. Evaluate your current financial situation: The first step is to conduct a detailed analysis of your current financial situation, including income, expenses , investments, and assets. Sage for Accountants makes it easy to understand your financial situation and implement tax planning.
2. Plan ahead: Tax planning is most effective when done in advance. The earlier you start making decisions, the more you can reduce your tax bill.
3. Identify applicable tax laws and stay informed of the latest tax regulatory changes: It’s essential to know the applicable tax laws and their modifications, both nationally and locally.
4. Identify deductions and benefits: Once you know the applicable tax laws, you must identify the deductions and benefits available to you.
5. Keep your accounting up to date and create budgets that allow you to know your estimated profit: Companies must keep their accounting in order and up to date to be able to estimate the profit for the fiscal year. The accounting profit is the basis for filing corporate tax returns. 
6. Implement strategies to reduce your tax burden: Based on the information gathered, the most appropriate tax planning strategies should be implemented for each case.
7. Review and update your tax planning: Tax planning is an ongoing process that should be reviewed and updated periodically. This will reflect changes in your financial situation and applicable tax laws.
8. Seek professional advice: It is advisable to seek the advice of a professional specialized in tax planning to ensure that you comply with the law and are not evading taxes.

Decisions affecting the taxes of self-employed workers and companies

There are many decisions that can be made to  reduce the tax burden. Some important decisions are as follows:

Decisions regarding business registration

If you’re thinking about starting a business, the timing of your registration is a decision with tax implications. The choice of legal form and location can affect your tax burden.

Choosing the timing of certain investments

The timing of certain expenses, or even the way they are made, has tax consequences. For example, we can purchase a vehicle with company funds, take out a loan, arrange a lease, or rent a vehicle, with tax treatment differing depending on the case. The timing of the investment is also important, as it will affect each fiscal year.

Take into account the depreciation criteria for fixed assets

Asset depreciation is a way to reduce taxable income. For example, in certain cases, accelerated depreciation may be possible, or there may be limitations on depreciation.

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Tax implications of inventories

We must take into account, among many other things:

• The different methods of stock valuation.
• The stock we hold at the end of the fiscal year.
• The impact on the results of the provisions for the depreciation of inventories.

Have a good tax advisor

Good tax advice is key to effective tax planning and reducing your tax burden. 

Therefore, tax planning is a powerful tool that can help you reduce your tax burden legally and responsibly. By following these steps and working with your tax advisor, you can ensure you take full advantage of all available deductions, credits, and exemptions.