Growing Your Business

7 Year-End Tax Tips for Small Business Owners

by
Mike Kilmer
on
12/2/2015
7 Year-End Tax Tips for Small Business Owners

When the end of the calendar year rolls around, it's time for many small businesses to start closing out their books. It's also wise to check-in with a qualified tax accountant just to ensure the year is ended fiscally healthy. Here's 7 important tips for year-end tax planning, so you can close out the books and take advantage of more deductions.

1) Run and Review All the Reports

You need to know all of the numbers in order to make sure that your books are accurate and up-to-date. If you need assistance, an accounting professional can help set up reports and Key Performance Indicators (KPIs) that are relevant to your business operations. Then, schedule a time to review all of the reports together. If you need specific breakdowns on the numbers, go ahead and ask.

2) Consider Deferred Income

Assuming your business is using a calendar year and the cash method of accounting, it's important to note that any income revenue received up to December 31 counts as income for the present year. If you shift it to after January 1, it then is counted as income the following year. Depending upon your business income level, deferring the income can save you a substantial amount of money. An accountant can consult with you on what steps might make sense to legally reduce your tax bill.

3) Spend Money

By making business purchases now, you can maximize your business deductions. Can you make vendor payments in advance? Do you need office supplies? Does your office equipment need an upgrade? Go ahead and make a list of purchases to maximize your business deductions. But remember, it may not be the best strategy considering your overall tax position. Consult with a professional tax preparer to determine the best course of action.

4) Review Your Inventory Values

Depending on the market, there may be a drop in the value of your inventory. If so, it's possible for you to claim additional deductions. Seek professional guidance it makes economic sense to claim additional deductions.

5) Create or Contribute to a Retirement Plan

Set up or contribute to a retirement plan before December 31 to lower your income. Now is the ideal time to maximize your contributions. If you haven't created a retirement plan yet, speak with a financial advisor to get assistance choosing the best one for your company.

6) Contribute to Your Favorite Charity (C-Corporation only)

Not only will contributing to a charity get you in the holiday spirit, it can help your business finances. You can donate monies or donate items like food, toys and clothing and claim a deduction. Just be sure to keep a receipt for your business records and get the proper documentation.

7) Save Up for Tax Liability Costs

Be sure to plan for tax liability costs. If your business is a C-Corporation the business should have been paying estimated taxes throughout the year. If not, the business can still make late estimated payments to minimize underpayment penalties. If your business is an S-Corporation, partnership, LLC or Schedule C, the income flows through to the owner's individual returns. As an owner you should have been paying estimates on your share of the flow through income throughout the year based upon on one of the safe harbors available. If not, it is time to begin figuring out how much you are going to owe. Start saving up enough to pay the liability or late estimates for 2015 to avoid substantial penalties for late payment.

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Mike Kilmer

Mike Kilmer

R. Michael Kilmer, CPA, CVA is a CPA based in Winchester, VA. Mike started Kilmer & Associates, CPA, P.C. in 1998 and understands the challenges of operating a business. He uses this real-life experience to assist clients with the opportunities and challenges that they face. In addition to possessing the expertise and technical skills required by the profession, he takes time to listen to clients concerns and communicates with straight talk in an understandable way. By combining technical expertise and real-life experiences, Mike is able to assist clients with solving their problems and complying with regulatory requirements.

KILMER & ASSOCIATES, CPA, P.C.
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