End-of-the-Year Tips for Doing Small Business Taxes
Are you part of the 58 percent of small business owners that find bookkeeping to be the most draining task?1 If so, tax season might be your least favorite time of the year. As the calendar year comes to a close, there are things you can start doing now to help save you money and make the next tax season a breeze.
Small businesses are taxed on profits. The lower your profits, the less money you may pay out in taxes. If you can afford it, you may want to start deferring any payments you receive in December to January. By holding payments off a month, you can lower your taxable revenue and in turn save money on taxes. This can help balance out an unusually high profit year, but ask your accountant first to see if this option makes sense for your business.
Does your office or business need a restock of supplies? Do it now, before January 1, so that you can cash in on deductions. It may be that the more reasonable business purchases you make before the end of the year, the better, in terms of your small business taxes. But, don’t start spending money unnecessarily just to increase your deductions.
Don’t just move money around
Moving money around instead of creating a true expense is a common mistake with small business taxes. Giving bonuses or paying off your credit does not count as an expense. While both of those things are good, they should not be a part of your tax strategy.
Donate to charity
Charitable donations are a win-win for small businesses. They help establish your businesses’ place in your community while helping others and are a tax deduction. Even better, more than just monetary donations can be claimed as tax deductions. You could donate goods or services, toys, equipment – although money works too.
Review your finances
While you are closing out the calendar year, organize files and check your inventory. Remember that if the market value of your inventory has dropped, you may be able to claim a deduction for depreciation. If your business has grown significantly since last year, you may want to take another look at your accounting to see if your current bookkeeper or CPA is still the best fit.
To build a strong business, you need a good grip on your financial standings. By doing a thorough review now and during tax season, you will have a better idea of how your business is doing and save yourself time down the road.
Mutual of Omaha Investor Services, Inc. and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.
1 Entrepeneur (2015, January, 28). Web page: What’s the One Task Small Business Owners Loathe? Retrieved November 27, 2017, https://www.entrepreneur.com/article/240875#
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