With the year coming to an end, many small businesses are thinking about their taxes and closing their books on the financial year. In addition, you may be thinking about the next year, future goals, holiday shopping for employees, vendors and clients, and planning which New Years Eve DC event you will be attending. It is extremely important to do your thorough research and preparation before sending anything to the IRS.
Since we are coming to the end of the year, there is still time to cut some potential tax costs. First, you should review your financial reports with an experienced accountant. This is vital to understanding how your year did, and to help with future goals and assessments. Find a professional that is willing to take the time to walk you through all the numbers so you fully understand the breakdown. It is important to find someone who can talk your language and help you really make sense of complicated data.
Second, figure out ways you can cut potential taxable earnings right now. Anything that is earned by December 31st, is taxable for the year. To cut down on costs, set up billings to happen after the 31st, thus avoiding these earnings being reported on your current financial year. This of course, needs to be discussed with your accountant using the information collected on step 1, to determine whether it makes sense to defer income or not.
Third, make those purchases now! Have you been waiting to get a new office chair, upgrade a computer, or anything in between, now is your time to purchase. You may also want to contact vendors to see if you can make payments in advance. These initiatives will help to produce maximum deductions and reduce you tax debt.
Next, setup or contribute to your retirement plan. If you have one setup, then plan on contributing the maximum amount so you can lower your tax burden. If you have not setup a retirement plan, now is the time to do it. You will need to set it up before December 31st. Talk to a qualified tax professional to point you in the right direction.
You should also think about making a contribution to a charity through your business. Not only is this a great thing to do due for the holiday season, but it will help brand your company in a good light and also reduce your tax burden. Please note — you do not just have to offer money, you can also offer items such as computers and clothing and claim fair market value. Be sure to fully document everything and have receipts.
Finally, one of the main things to do is to plan for next year now. Think about the problems you have faced in terms of figuring out your income, costs, assets etc. What was wrong with the process this year? When you think about these problems you faced, you can produce a new system for next year that will make your taxes much more seamless.
Do you need some help from a professional? Contact us for a free telephone consultation.