Top 3 Year-End Tax Tips for Your Business
As the year comes to an end, small businesses may need to make some important tax moves. Here are a few tips to help you lower your tax bill and end the year strong:
Review Your Income
The clock is ticking and 2022 is on its way out, so make it a priority to review your income for the year. Once you’ve finished your calculations, you should adjust accordingly. If your business income is higher than anticipated for the year, you’ll need to increase your deductions. If you find your income is lower than anticipated, be sure to consult with your accountant to see if your company is eligible for additional tax breaks.
Hire a Tax Professional
Although you may be capable of doing your bookkeeping yourself, it’s better to hire a tax professional to file your taxes. Certified Public Accountants (CPAs) and other tax experts are well-informed about the latest rules and regulations and can help ensure your paperwork is properly filed and that your deductions are maximized. Plus, in the unfortunate event of an audit, you’ll be well positioned to get through it with a CPA representing you to the IRS. Keep in mind that it’s best for your business’s financial health to work closely with your accountant throughout the course of the year, not just when the time comes to file your business tax returns.
Reduce Your Taxable Profits by Making Strategic Purchases
The end of the year is the perfect time to make purchases for your business. Doing so will allow you the opportunity to write off purchase expenses and reduce your taxable income. Here are a few ways to increase your business’s tax deductions:
If you’ve been putting off investing in new equipment, now is the time to make the purchase. Buying new computers, desks, software, delivery trucks, tools, or even manufacturing equipment before year end will allow you to write the expense off. Remember using outdated or poorly functioning equipment can really hamper your business’s productivity.
If you’re looking to lower your taxable income, try stocking up on inventory before the end of the year. You can usually score better deals at the end of the year and when you buy in bulk. Plus, securing extra inventory now can help you keep up with demand and be prepared for next year’s busy seasons.
Do you need paper goods, writing utensils, mailing supplies, printer ink, letterhead, or business cards? Buy them now, enjoy the tax deduction, and have your supplies on hand for the year.
- Prepay Business Costs for the Upcoming Year
A great way to maximize your business deductions at the end of the year is to prepay what you can for next year. Some ideas include:
- Insurance coverage for the upcoming year
- Changing monthly subscription services to yearly payments
- Business licenses
Be sure to consult with your tax professional in order to ensure that your prepayment meets the criteria for the IRS’s 12-month rule. An expense you pay in advance is deductible only in the year to which it applies, unless the expense qualifies for the 12-month rule. For example, if rent costs you $2,000 per month, you may be able to send a $24,000 check to your landlord by the end of the year to prepay 12 months of rent, and have the expense be deductible this year.
Need quick funding to finance new equipment, hire an accountant, or stock up on inventory? SBG Funding can help you access financing before the end of the year! Call us at (844) 284–2725 or apply online to learn more.