Sure, it’s the holiday season, and the last thing you want to think about is taxes. In this case, procrastination can be a costly. With a little time and effort, your small business can reap some real rewards. But hurry. Most tax-saving moves must be completed before the end of the year to qualify for that year’s tax filing. A careful review of business expenses and company operations can turn up ways to: 1) Maximize tax deductions. 2) Use charitable holiday giving to reduce taxes. 3) Adjust income to your advantage for tax filing purposes. Here are some year-end tax strategies that can bring your business a holiday bonus:
The best contacts and resources to help you get it done
Delay income
As a rule, you want your customers and clients to pay up quickly. December is a different matter. If you can defer income to the first week of January, you push back the time when you have to pay taxes on that income to April of the following year. By delaying income for a few weeks, you can hold onto more of your money for a while.
I recommend: Create invoices using templates from
Microsoft and include a request to “Remit Payment After January 1.” The CCH Business Owners Toolkit offers a discussion of
Business Income that can help you determine what is and what isn’t reportable income for tax purposes.
Write off inventory
Check inventory for damaged goods or items that have become obsolete. The loss of value can be used as added tax deductions.
I recommend: Keep track of damaged or unsellable goods with these customizable
inventory forms from Microsoft. Or go with a software solution, such as
QuickBooks’ Enterprise version.
Contribute to a retirement plan
If you’ve put off starting or contributing to a retirement plan, now is the time to get it done. Any money you put into an IRA, 401k or other plan reduces your income for tax purposes. A word of caution: different retirement plans can have different contribution, reporting and filing requirements and deadlines. Check with your financial advisor and accountant to make sure you understand the rules.
I recommend: If you don’t already have a plan, start one now.
PAI offers a range of plans for small businesses. For simple, do-it-yourself retirement plans, check out
401(k) easy. See how to establish a
SEP here. SmartMoney.com offers a review of the various types of
small business retirement plans. For more information, see the IRS page on
tax information for plan sponsors.
Help a worthy cause
Charitable contributions are deductible expenses, so get into the holiday spirit and make a donation on behalf of your company before the end of the year. It can not only help lower your taxes, it can make you feel better.
I recommend: The simplest solution is to write a check before Dec. 31 to a charitable organization in your community. Some Web services can point you to charities and even allow you to contribute online. Try
America’s Charities or
Network for Good.
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