While “tax season” is generally associated with the beginning of the year for business owners and March through April for accountants, tax season for small business owners and entrepreneurs should really be all year long. That’s right — all 12 months.
But of course, that isn’t always easy or feasible, and often times those who are busy running their businesses don’t necessarily get excited about dedicating any more time to taxes than what’s absolutely necessary.
So, instead of feeling overwhelmed, here’s a quick hack for you — get a great accountant and focus on a few very important items at year’s end. By pairing those two necessities, you will put yourself in decent shape heading into the New Year.
Here are there year-end responsibilities you need to make sure you handle:
- Make a year-end to-do list. The first thing you should aim to do in October or November is compose a to-do list with deadlines for completing the responsibilities. Your to-do list should include: running your P&L report, calculating monthly and total expenses, identifying donation amounts, and reviewing your past taxes. In addition, add everything else that you need to do when you wrap up your books on December 31 — and if you aren’t sure what that requires, see my previous hack and ask your accountant.
- Check tax law changes. Every year, there are a slew of changes to business tax laws. Some are significant while others are minor. Either way, some of the more notable changes can have a major impact on your deductions or payments. In the end, overlooking tax law changes could result in overpayment and affect your available cash flow.
- Consider your last-minute purchases. Is there anything you need to purchase before you close the books on the year? Have a chat with your accountant to determine what you should purchase before year-end and what can (or should) wait. Chances are, your accountant will review your P&L and provide guidance on what you should spend and how much you should liquidate from your account based on your overall numbers. And before you consider draining anything from your account, make sure you have an idea of your cash flow for Q1 of the following year.
If you choose to not focus on these three things, then at the absolute least, consider asking these questions during your tax planning:
- Are any tax breaks expiring this year that I need to be aware of when filing?
- What are the limits for deductions that affect my business (such as the section 179 deduction for the purchase of qualified assets)?
- Should I purchase any machinery or other equipment before year’s end?
- Does my business qualify for any small business tax credits?
- Should I consider placing money into a retirement plan or IRA?
Although tax planning and preparation isn’t always the most glamorous task, it’s a necessary task. (The only things guaranteed in this life are death and taxes, right?) So take some time to prepare, and put yourself in the best position going into the New Year.