Business owners quickly turn their focus at the end of the year towards their small business taxes. We have provided a number of helpful tips for small business owners that can pay significant dividends for the following year.
Update Your Accounting
Although you know it is a wise move to always make sure your books are up-to-date, sometimes they are not as accurate as they should be due to all of the other tasks you find yourself doing on a daily basis. Understand your company’s financial situation by keeping accurate and up-to-date books. Meet with your accountant for end of the year advice that could be beneficial to your organization.
If your cash flow can handle deferred income, it would be a good move to defer any income until after the New Year. Any payments to your company after the New Year will help cut your tax bill for that year. A deferral strategy should be developed by you and your accountant, and is based mainly in part to how your organization is structured (LLC, partnership, corporation, etc.).
If our cash flow permits it (remember, cash is king!), don’t wait to make a purchase you know you will need for the following year. Go ahead and purchase the products or services you know your business will need for the immediate future. This will help maximize deductions for the year. Some of the expenses you may need to purchase could include office supplies, paying off bills early, repairs and maintenance, and equipment purchases such as computers or machinery.
You company can enjoy the added deductions of any inventory you may have that has been damaged or are no longer in use.
Contribute to a Retirement Plan
A great way to reduce your income for this year is to set up a retirement plan or simply making additional payments to your plan before the end of the year. If you are making contributions to a retirement plan, check the contribution limits for your specific plan (401(k), Roth IRA, etc.). Consult with your accountant or financial planner about the best strategy for you when you are thinking about starting or contributing to your retirement plan.
The items listed above are some simple tax tips that could benefit your business at the end of the year. Talk to your accountant about specific strategies that could work with your business.