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5 Small Business Tax Tips for Year-End Accounting

The end of the year is here and everyone can feel April 15th looming in the near future. To ensure that you are effective in mitigating your tax liability here are some great business tax tips:

  1. Get Your Bookkeeping Finished in December: Part of your year-end tax strategy is to have a good understanding of your company's financial health. Focus on getting your books up-to-date and accurate. Schedule time with your CPA for year-end advice. If your books are a mess, be sure to contact us to help you get them in order.
  2. Defer Income, Let Your Receivable Slide into January: Any payments your company can receive during the first week of January as opposed to December cuts your tax bill. Every cent deferred until January 2010 will not owe taxes until April 2011. Any deferral strategy will depend on your profit and losses for the year and business legal structure (LLC, partnership, corporation, etc.) so check with your CPA first.
    Depending on your income tax rates in the New Year, deferral of income can make the best sense for many sole proprietors, partnerships, LLC's, and S corporations. Make sure your cash flow can handle the deferred receipt.
  3. Increase Expenses: If you've been thinking about upgrading equipment, software or other business items you require in the immediate future, purchase them this year to maximize deductions. If you can see a need for goods and services in the first quarter of the New Year, buy them now if cash flow permits. Consider the following items for expenses:
  4. Inventory Write-Offs: Depending on your accounting process, you may wish to check inventory for goods that have been damaged or have become obsolete. The drop in market value of the inventory can provide your company with added deductions.
  5. Contribute to a Retirement Plan: Make payments to your retirement plan or set one up before the year-end to reduce your income for this year. Check the contribution limits for your type of plan. In the U.S.: 401(k), KEOGH plan, Roth IRA, or SEP's. (For SIMPLE IRA's the deadline is set in October, too late for year-end tax planning.) In Canada: an RRSP. Discuss the best strategy with your financial planner or CPA.

As always, if we can help you get started or finished for your year-end tax preparation, call us.