Most business owners hear from their accountant in March. By then the year is over, and the only thing left to do is report what already happened. The weeks before December 31 are when you can still change the outcome.
Here is what I review with clients at this time of year.
1. Get your books current
You can’t plan with numbers you don’t have. If your bookkeeping is behind, catch up now, reconcile your bank and credit card accounts, and separate any personal expenses that landed in the business account. Once the books are accurate, a profit and loss report tells you where you actually stand.
2. Estimate your tax before year-end
Run a projection of your income and expected tax now, not in April. A projection shows whether you are on track, whether you have underpaid your quarterly estimates, and whether you will owe more than you expect. The fourth quarter estimated payment for most calendar-year taxpayers is due in January, so there is time to plan the cash.
3. Look at timing
Whether it makes sense to buy equipment, pay certain expenses, or send invoices before or after year-end depends on your situation. Don’t make a purchase just for the deduction. Spending a dollar to save a few cents is rarely a good trade. Talk to your CPA before a large purchase so you understand the tax effect and the cash effect.
4. Check retirement contributions
Some retirement accounts allow contributions after year-end, and others have to be set up or funded earlier. The rules depend on the type of plan, so find out your options while there is still time to act.
5. Review payroll and contractor payments
If you pay employees or independent contractors, confirm your records are complete. Collect missing W-9 forms from contractors now. It is much easier than chasing them in January when forms are due.
6. Keep your documents organized
Gather receipts, mileage logs, loan statements, and any asset purchases from the year. A simple folder by category saves hours at filing time and usually saves you money.
When to get help
If your books are behind, you aren’t sure how much tax you will owe, or you just want a second opinion before year-end, a short planning conversation can help. At TaxFlow Financial Services, we work with small businesses on bookkeeping, payroll, tax preparation and planning, and compiled financial statements, and we explain things in plain language.
Call (615) 743-5859, email info@taxflowfs.com, or visit www.taxflowfs.com to schedule a call.
This article is for general information and is not tax advice for your specific situation. Tax rules change and depend on your facts, so talk to a qualified professional before making decisions.