Year-End Tax Tips for Small Business

The end of the year is a busy time for business owners for many reasons. Most small businesses are frantically trying to land that big fish, drive in those last few sales, and increase revenue as much as possible by the last day of the year. Everyone enjoys the satisfaction of ending the year on a good note, especially if shareholders or investors are involved.

Tax Time Will Be Here Before You Know It

As hard as it is to believe, tax time is just around the corner. The beginning of a new year causes a flurry of activity as business owners prepare to turn their financial statements over to their accountants. While the accountant is the one who seemingly works the magic when it comes to tax preparation, it doesn’t happen in a bubble. Business owners must also be involved to ensure that all bases are covered.

Things You Can Do Now To Be Ready

Savvy entrepreneurs understand the importance of planning ahead for big tasks. Here are a few actions you can take now to help alleviate some of the stress-filled activity that typically takes place in the first quarter of a new year.

Update financials. Start now to update all your financials. Most business owners get so caught up in day-to-day operations they forget to stay on top of financial data entry and reporting. Log into your accounting system now, and make sure all income and expenses are updated. Also, make sure bank and credit card statements are all reconciled. This will save a lot of time next year when it’s time to pull financial statements and hand them over to your accountant.

Catch up on estimated tax payments. Many small businesses have to make quarterly estimated tax payments. Any missed payments result in penalties. Take a few minutes now to ensure that you’re up-to-date on quarterly tax payments. Even if they’re late, making payments now reduces the penalties associated with missing the deadline. You’ll pay more if you wait until tax time to catch up.

Review accounts receivable. Now is an excellent time to review your accounts receivable and try to collect outstanding debts. Contact the customers and partners who’ve been slow to pay and see if you can nudge them to do so. The more you collect, the better the company will look in the eyes of investors, shareholders, and employees at year-end. 

Consider year-end investments. One way to reduce taxable income is to write off the purchase of new assets. If you need new printers, computers, or other office machinery, this may be a good time to invest in them. Check with your accountant to see what types of purchases qualify.

Make a charitable donation. Charitable donations are another great way to reduce taxable income while also benefiting worthy causes. If you’re trying to reduce the amount of tax you’ll pay on this year’s income, consider making year-end charitable donations.

Start gathering documents. Start gathering the documents you’ll need to file your taxes next year and store them where you can easily access them when they’re needed. These documents may include some or all of the following:

• Last year’s tax return
• Profit and loss statement
• Balance sheet
• Bank and credit card statements
• Payroll reports, including information on contractors or consultants engaged
• Details on any asset purchases or sales
• Documentation on business vehicles plus associated mileage
• List of business expenses

Call Adams Accounting for More Information

There are other actions you can take now to prepare for tax day next April. The professionals at Adams Accounting Solutions are happy to guide you through the process, suggesting tasks you can complete now to make tax time less stressful. They’ll also review your financials and highlight possible ways to reduce your taxable income. Call today to make an appointment. There’s no time like the present!