End of Year Tax Planning Tips for Your Business
You might not have to have to file taxes for your small business until next spring, but the end of the year can bring a number of business tax planning opportunities for companies both large and small. If you want to try and reduce your tax bill next April, here are some planning tips you can focus on as the end of the calendar year approaches.
Consider Deferring Income until January
Is your business at risk of putting you into a higher tax bracket that will eat away a larger percentage of your income? One way you could avoid this would be to defer some of your December income with a little creative invoicing. For example, let's say you do work for someone on December 20. If you can figure out a way to not send your invoice until January 1, the work you did in December will be paid for by the customer in January, allowing you to count it as income for next year, not this year.
Add to Your Expense Report
Another way some businesses will try to get themselves into a lower tax bracket is to increase their expenses for the last month of the year with some big-ticket items. Your profit is revenue minus expenses, and adding a few more expenses to your bottom line can keep you in your desired bracket. If you need to upgrade your computer or office furniture in the near future anyway, you might as well do it now so you can take advantage of the purchase for this tax year.
Calculate Your Taxes Early
Even if you don't plan on actually submitting your tax forms immediately, you should still do the math at the end of the year so you will know how much money you need to put aside for taxes. Calculate this amount as soon as you can and consider putting it into a business savings account if you are not going to make the payment until April. You can continue using this account to hold the money for future tax payments, allowing you to always be prepared for tax season.
Contact a Tax Professional
While the above tips can be used by a savvy business owner, a dedicated tax professional might know of even more tips or tricks to help reduce your tax bill. Contact a local accountant or bookkeeper, like Golden Tax Relief, to discuss business tax planning ahead of the New Year.