The end of the year is a busy, if not the busiest, time for small business owners. You’re gearing up for a new year and trying to wrap things up before the year comes to a close. One thing that should be on your mind during this time is year-end tax planning.
8 Year-end tax planning strategies
The end of the year is prime time for wrapping up your accounting books and preparing to push your business forward. But without careful tax planning, you could wind up setting your company back. You need a solid strategy for not only turning in your tax return on time, but also filling it out in a way that benefits your business.
Not sure where to start with your end-of-the-year tax planning? No worries. Follow the year-end business tax planning checklist below.
1. Don’t wait until the very last minute
All business owners are guilty of procrastinating at some point or another. “I’ll do it tomorrow” turns into “I’ll do it next week.” Then all of a sudden, you’re left scrambling to get what you need done at the eleventh hour.
When it comes to year-end tax planning, the last thing you want to do is procrastinate. As you prepare to roll into the new year, don’t delay tax planning. The earlier you start, the better off you will be come filing time.
To avoid last-minute tax planning, set aside time in your schedule each week to sit down and chip away at your tax planning duties. You can even set reminders for yourself (e.g., on your phone or calendar) to take a step back from your other work and spend time working on your year-end tax planning.
2. Assess your business’s financial health
Year-end is the perfect time to assess your business’s financial health. To find out how well your business is doing, take a look at your financial statements:
You can use your financial statements to see if your company had gains or losses throughout the year. Dig into the causes behind each gain or loss and use your findings to make adjustments for the new year and set goals.
Also compare this year’s statements to previous years to see where you stand. Comparing your statements from year to year lets you see how far your company is progressing and if your finances are healthy.
3. Defer or accelerate income
Want to lessen your tax liability? Consider deferring income. The income you receive by December 31 counts as income for the current year. You can lessen your tax liability by postponing income to after January 1.
Pushing payment due dates after January 1 delays it from being counted as income until the following tax year, giving you more time to pay taxes on business income.
If you expect to be in a lower tax bracket next year, you might also want to defer income because you’ll pay taxes at a lower rate.
The way you defer income depends on your accounting method. For example, if you use cash-basis accounting, you can delay income by sending your invoices later than usual. You can also make the due dates on your invoices for next year instead of the current year. With cash-basis accounting, you record income when you receive it. So, income willContinue reading