Year-End Tax Planning Strategies
Here are are three important tasks to conduct as the end of the tax year-end approaches:
1) Get organized. Start by getting your tax documents organized, which includes both your business expenses and income. If you handle your own accounting for your business, it’s prudent to use an accounting software program, which will help you record your income and expenses accurately as well as make it easier to organize your finances. An accounting software program can also be used for invoicing clients, creating business reports, and having access to balance sheets and income statements. It’s important to keep all financial areas of your business in order, including inventory monitoring, invoicing, incoming and outgoing funds, payroll, and other monetary paperwork. If you start getting organized now, the remainder of your year-end planning will go more smoothly.
2) Consider setting up a retirement plan. If you haven’t done so already, it’s not too late to set up a retirement contribution plan. Whether you decide to use a Traditional IRA or Roth IRA, any pretax contributions you make prior to year’s end will reduce your taxable income. As a result, your tax liability is reduced, offering some much-needed tax relief. If you haven’t yet maxed out your retirement contributions for the year, then if at all possible, do so as part of your year-end tax planning.
3) Set up an appointment with your tax accountant. Before the December holiday season — and the sooner the better — you should also set up an appointment with the accountant who handles your taxes. Ideally, this should be the accountant or CPA that you meet with to file your business tax return. In any event, if you have been following your business plan throughout the year with excellent recordkeeping and organized files, this end of the year meeting will go quickly and smoothly. Your tax accountant will use your documents, finances, and business assets for preparing your end-of-year taxes and plan for the next year.
The end of the calendar year is important for small businesses for many reasons, but tax planning is one of the most important. Tax time will be here before you know it, but if you have your financial house in order, you won’t have any hiccups.