9 Year-End Tax Plannings Tips
As the year comes to a close, it’s a great time to look at your tax bills so you can plan for a larger refund and get ahead of the curve for next year.
You may not have time to visit your CPA during the busy holiday season. So we’re bringing our top end-of-year tax planning tips straight to you to be ready for January!
How You Can Maximize Your Business’ Tax Strategies
1. Organize your documents.
You know all those loose files, scattered bills, receipts and cancelled checks? It’s time to organize them all together.
Round up your receipts, bank statements, expense reports, etc. and start to make a list to give to your tax advisor.
It is also helpful to come up with a full checklist of all your active accounts. The sooner you organize your files, the better — especially if you discover you need to request a new copy or a replacement.
2. Document your business activities.
Business owners who meet a certain standard of participation are considered “passive investors” and may not need to pay certain taxes on their income.
You can estimate and report your activities to the IRS to see if they qualify for the tax break. These activities can include hours spent with appointments, emails and other business practices.
3. Reconcile your bank accounts.
Reconciliations are a useful tool to verify all your transactions are posting to your accounting software. Disparities in ledger bank balance and bank statement will be much easier to point out and resolve.
4. Double check your invoices.
As a business owner, have you invoiced and received payment for all the products/services done for clients? Review your invoices and catch up as necessary.
For customers who still owe you, prioritize your receivables and send out “past due” notices on collections.
5. Report your fixed assets.
Did you make any larger purchases this year, such a car, furniture or equipment? Be sure to include these on your balance sheet, including depreciation if you know it. (Your CPA can help verify this!)
6. Verify your inventory.
Verifying your inventory balance and the most up-to-date inventory value should be confirmed by the end of the year.
Your tax advisor will consider:
- Inventory balance at start of new year
- Cost of inventory purchased during year
- Inventory sold during year
- Ending inventory as of Dec. 31st
7. Verify expenses.
Accounting software such as Quickbooks is a great tool for tracking and recording your accounts payable and expenses.
Your tax preparer can help identify which expenses may qualify for a tax break, including phone and internet bills or travel expenses.
8. Collect W-9’s.
If you haven’t already done so, collect W-9’s from any vendors or contractors you’ve worked with through the year.
9. Request a tax projection.
Your CPA can prepare a tax projection based on all your known income and deductions for the year. By being proactive, you can plan better and take advantage of opportunities that can save you money or increase your refund.
Always a Good Plan: Create a Budget!
There’s never a better time to start planning for the future than now.
If you need extra assistance planning a budget, talk with our expert tax advisors, specializing in small business owners.