Small business owners often put off completing and gathering their financial records for the tax year until March or April rolls around, but doing that closes the door for the business to strategically adjust its annual taxable profit.
Here are two items that small businesses can use to adjust their numbers that must be done by December 31st to qualify for the prior years’ tax treatment:
Year-end expense account catch-up. If your company operates as a corporation, you and your employees need to receive reimbursement for any expenses by Dec. 31 to ensure the corporation will receive the tax deduction for these business expenses.
Pay for future expenses now. If your business could use some tax burden reduction this year, consider pre-paying for some of the business’ regular expenses now. You may want to pre-pay for your office rent or mortgage payment for the first quarter of next year, for instance, or pre-pay on equipment leases or services you know you will continue to use, like your telephone provider. You must make those payments by December 31st to utilize this strategy.
Of course, you have to know your numbers before you can know if using these strategies would benefit you or not, or if it would be better to defer the expenses to next year. If you would like some tips on getting your business’ records organized, see 4 End-of-the-year Tax Tips for Small Business Owners.
If there were any notable changes to your profit situation this year, you should schedule a tax review to help you find ways to reduce your taxable income. Call us today at (612) 206-3701 or fill out our contact form to schedule a small business consultation session so we can help you plan for next year with advanced business asset protection tactics.
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