Year-End Tax Tips for Your Small Business

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As the holidays approach and 2016 winds down, there are likely many things on your mind. Settling accounts, handling sales, and promoting your business—combined with familial and social obligations—can make this time of year a little more hectic. One thing small business owners need to add to their list of to-dos is tax preparation. With tax season just around the corner, now’s the time to get your business and personal finances in order. Use these year-end tax tips to set your company up for success in the coming year.

Emphasize Organization

While organization won’t provide you with more money on your tax return, it can save you tons of time and help you plan better for the year ahead. Organization allows for better preparation, and the best time to prepare for next year’s taxes and expenses is while you’re filing your current year taxes. Sit down and review your small business’s financial situation. Take a look at the expenditures from your past year, and compare them with projections for the next year. Make sure your accounting records are organized and up to date, then go item by item and consider which costs were unnecessary.

Consider Cash Accounting

If you’re not using cash accounting, it may be time to start. This means not paying tax on income until it’s received. You also cannot deduct an expense until the money is spent. As you approach December, you can tell a customer or client to wait until the beginning of the new year to pay their invoice to avoid paying taxes on it this year, or you may choose to accelerate a purchase before the year is up in order to qualify for a deduction. Learning how to best structure your incoming revenue and outgoing expenses is important for diminishing your tax bill and/or receiving a larger tax return.

Be Charitable

Consider making a donation to an IRS-approved charitable organization. Businesses can make tax deductible charitable contributions. That doesn’t necessarily mean cutting a check and sending it out in the mail. You can also make equipment contributions. If you have old desks or monitors that sit around collecting dust, consider donating them to local organizations. If you would prefer to simplify the process and just make a cash donation, you can find a variety of approved organizations on CharityNavigator.org.

Retirement Plan Contributions

Retirement plan contributions are a simple way to improve your tax requirements. If you haven’t yet hit the maximum, simply contribute more this year for an easy step. If you don’t have a retirement account, consider opening an IRA. If you’re self-employed (as most small business owners are), consider an SEP IRA. This type of IRA is designated for small business owners and self-employed taxpayers that have freelance income or have one or more employees. These allow for larger contributions, which makes them ideal for business owners. This helps reduce your income for this year, which lessens the amount owed to the IRS.

Make Necessary Purchases

If you’re going to need new items for business purposes next year, spend money on them now so you can maximize your deductions. Do you need new equipment? Are your office supplies low? Do any of your vendors accept early payment? Consider the expenditures you expect in 2017 and make them now in order to claim more deductions.

Hire Some Help

Whether your business expanded rapidly and left you in the lurch or you’re just starting out and find the business tax filing process to be more complicated, there’s never any shame in looking for professional tax help. A tax professional can help you determine the right retirement accounts to open, help you find small business tax breaks, and make sure you’re making the most of any credits and deductions available to your company.

As we approach the end of the year, make sure your company is financially prepared for tax season with these essential end-of-year tax tips.

 

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