Begin Now to Plan for Business Year-End Tax Strategies
But this is your wake-up call...it's already September.
Now is the time to take stock of what you've done this year to make sure that your small business takes advantage of every possible tax break available.
Here are just a few ideas to think about that could have a big payoff to help you minimize your tax liability this year:
1. Take a look at your accounting. Part of your year-end tax strategy this year, and every year, should be to take a good long look at your accounting. Get a firm grasp on the financial well-being of your business. Ensure that your books are up to date and accurate. Don't wait until tax time to go over your books and make sure that you've done everything you can to lower your tax bill. Doing it now before the year-end rush will make it easier for you to take the time to really look at the financial health of your business.
2. Look to defer income. If you can possibly take payments in early January instead of December and defer the income until the next year, do it. That will lessen your tax bill for this year. You won't owe taxes on money earned in January until April of the following year. Take a look at your profit/loss picture and the legal structure of your business and see if deferring income is a feasible strategy for you. This is a good question for us to discuss during an business wide audit of your business.
3. Increase your expenses. This may be counterintuitive since we all want to lessen our expenses, but if you are thinking about making any capital purchases required by your business, do it before the end of the year. And this is a good time to take stock of any capital purchases you'll need to make in the first quarter of next year. If cash flow will permit, make those purchases now to maximize your tax deductions for this year. Think about buying any of these items for expenses:
• Office supplies - paper, printer cartridges, stationary, pens, etc.
• Office equipment - furniture, copiers, etc. An analysis of whether to take the full deduction under section 179 of the Internal Revenue Code or whether you should buy later and take the depreciation over several years.
4. Medical Expense Reimbursement Plan (MERP). You might want to take a look at setting up a medical reimbursement plan. Especially with the changes in health care law looming, now may be the perfect time for you to be proactive and take control of your medical expenses.
5. Take a look at your retirement plan. If you already have a retirement plan set up (and you should), make payments into the plan before the end of the year. If you haven't established one, do it now - we can help with this. This will reduce your taxable income for this year. Always make sure that you make contributions in accordance with the limits for the type of plan you have. Talk to us about these limitations before you make contributions. A word to the wise here: The deadline for contributions to simple IRA's in the United States is October so don't wait or you'll miss the deadline for this type of retirement plan.
These five tips will affect different businesses in different ways depending on how your business is legally structured and the accounting method you've chosen to use. Call us to talk about the best possible combination of these strategies, and more, to minimize your tax bill for this year.
If you're a small business owner or you're considering taking the leap to business ownership, call us today to schedule your comprehensive audit of in the area of tax, insurance, legal and financial areas. As your personal legal advisors we will identify any holes in the foundation of your business and what you need to do to fix them. Normally, this session is $1250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.