Last Minute Tax Tips for Small Businesses
by Frank X. Laborde, CPA, the president of Laborde & Associates
In the holiday rush and excitement it is often hard to think of taxes, but a quick look at these year-end tax tips for small business can pay big dividends.
Start by looking at your books. Having a good understanding of your company’s financial situation is an important part of your year-end tax strategy. Ensure your books are up-to-date and accurate and that you’ve separated business expenses from personal ones. Then, plan time with your accountant. Have him look at what your tax liability will be and see what you can do before the end of the year to minimize it. Believe it or not, there are several strategic ways to maximize tax deductions, reduce taxes and ethically adjust income to your benefit for tax filing purposes. Consider:
1. Making a charitable donation: Feel good about taking a tax write off by donating to a worthy cause. Pick something you are passionate about and write that check before December 31.
2. Deferring income: Any payments your company can receive during the first week of January as opposed to December cuts your tax bill since you won’t have to pay taxes on it until April 2013. Check to make sure your business structure makes this a good choice and your cash flow can handle the deferred income.
3. Shopping around: This is a great time to buy items your business will need in the immediate future to maximize deductions for this year. If you can see a need for goods and services in the first quarter of the new year, buy them now, if cash flow permits. Consider purchasing office supplies, equipment and subscriptions. You can also book travel, arrange for equipment repairs or have maintenance done.
4. Writing off inventory: Depending on your accounting methods, it may be a good time to check inventory for goods that have been damaged or have become obsolete. The drop in market value of the inventory can provide your company with added deductions.
5. Paying into retirement: Make payments to your retirement plan or set one up before the year-end. Check contribution limits for your type of plan (401(k), KEOGH plan, Roth IRA, or SEP’s), and discuss the best strategy with your financial planner or accountant.
There are no one-size fits all solutions to end-of-year tax plans. These tips will apply differently to each business owner’s situation and accounting method. Take the time to review the best strategy with a professional advisor and make the most of the year-end tax planning for your small business.