If your small business kicks into high gear when the fall foliage begins to change, tax preparation is probably the last thing on your mind. However, the change of seasons means the mad dash towards the holidays and year-end is right around the corner.
Fall is an ideal time to evaluate your current tax situation. Instead of putting off your tax-related concerns and responsibilities until December or January, do the prep work now. This may help you reduce your tax bill for the current year and avoid potential issues when tax filing season rolls around.
Here are five things every small business owner can do to get ready for 2018 before the end of the year closes in:
1 – Make a Checklist
When it comes to your business taxes, omissions or mistakes in even the smallest details can cost you time and money. To make sure your business is tax-ready, create a checklist of important action items. This can include filing payroll forms, sending 1099 forms to contract workers or vendors to solicit missing Taxpayer Identification Numbers (TINs), and assembling income and expense records.
Consider adding to your list a review of your business insurance coverage. Having the right type and amount of insurance to protect your organization and employees is essential, and it’s important to keep in mind that your business needs can change over time. Reviewing your policy annually will allow you to update it as needed to ensure that your coverage continues to fully protect your assets in the year ahead.
2 – Get Organized
It may seem like you have plenty of time, but the 2017 tax season kicks off in just four short months. Get a jump on your tax prep by creating a process to help you stay on track and avoid scrambling at the last minute. Update your bookkeeping records and file tax related documents and other relevant information in one place. Organize receipts and expense records throughout the year so you can easily pull together the documentation to support deductions or credits you claim on your return.
It’s also a good idea to create a reminder for when your taxes are due. If you make estimated quarterly payments, the next installment is due January 15th. Corporate taxes are due March 15th, and personal taxes are due no later than the traditional April 15th deadline.
3 – Know Your Deductions
There are numerous potential tax write-offs for small business owners. The short list of possible deductions includes:
- Home office expenses
- Startup costs
- Office supplies, furniture, and equipment
- Computer software and subscriptions
- Telephones (including cell phones if used for business)
- Business travel, meals, and entertainment
- Retirement contributions
- Applicable insurance premiums
Now is the time to check with the IRS or your tax professional to determine your eligible deductions. It is important to have the most up-to-date tax law information, as changes can impact eligibility requirements for tax credits and deductions.
4 – Spend Money
Do not hesitate to spend money on your business to maximize deductions. If you can afford to pre-pay expenses that can be deducted from your business income, consider doing so now. Make vendor or advertising payments in advance, lease a vehicle, stock up on office supplies, or give your employees their year-end bonuses before December 31st.
If you need to purchase or upgrade your equipment, now is the time. Some business equipment falls under Section 179 of the Internal Revenue Code, which allows business owners to deduct capital assets immediately rather than depreciate them over several tax years.
5 – Defer Income
Every small business shares the goal of increasing revenue month over month. However, planning ways to defer income to after January 1st is a strategy that can reduce your 2017 tax bill and potentially save you a significant amount of money. If you can afford to wait, delay invoicing your customers or clients for December activity. This reduces the income you report for the year and the amount that you will be taxed. Just make sure it won’t add to your tax burden or cause financial problems down the road.
Knowing you are prepared long before it’s time to start closing your books for the calendar year will allow you to concentrate on what matters most: growing your small business.
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