5 End-of-the-Year Tax To-Dos
When you think tax time, you typically think about mid-April, when returns are due. But if you’re a small business owner, one of the most important times to keep in mind is actually December.
Yes, you’re probably thinking about things like holiday promotions and new-year strategic planning, but now also is one of the best times to better prepare yourself for tax season. By following these five tips, you can prevent the last-minute panic that many business owners put themselves through – and you can even realize some significant tax savings.
Here are five end-of-the-year tax to-dos to get out of the way before January 1. (Note: Most of these vary depending on what type of business you have, such as an LLC, S Corp, etc.)
5 Tax Tasks for the End of the Year
- Weigh Your Income and Deductions: Depending on how your business performed this year, you should employ one of two strategies pertaining to your taxable income and deductible expenditures. If business boomed this year, it’s possible you’ll be “upgraded” into a higher tax bracket next year. If that’s the case, you’ll want to make sure to accelerate income into this year, but also try to hold off on reporting as many deductible expenditures as you can until 2017. Conversely, if business was more stagnant year-over-year, consider deferring income into next year and take deductible expenditures this year to (temporarily) lower your tax bill.
- Get the Family Involved: While adding a spouse to your payroll doesn’t have much in the way of tangible benefits, depending on your business classification, you can reap some serious rewards by adding your kids to the payroll. Specifically, you don’t have to hold FICA or payroll taxes on any employee younger than 18, plus you can use their standard deduction against earned income. However, the kids must provide some sort of legitimate service to your business.
- Buy a Vehicle: If you purchase a SUV, truck or van and at least half of its use goes toward business, you can deduct a substantial amount from your federal taxes during the year in which you purchased it. There is a $25,000 limit for certain types of vehicles, such as SUVs, though that limit is waived for heavier-use vehicles, including vans. In addition, some states will allow you to deduct for a work-use vehicle.
- Invest in Retirement: There are several retirement-related moves you can make before January 1 to help save money at varying levels. For instance, you can convert a 401(k) or traditional IRA to a Roth IRA, where you’re taxed at your current bracket now, but won’t have to take out taxes upon withdrawal in the future (when, one would assume, you’re at a higher tax bracket). You can also look into SEP IRAs, Safe Harbor 401(k)s and even pension plans, all of which can help you reduce your tax bill.
- Talk to a Professional Tax Adviser: Think of a tax adviser as a genie that can grant a third wish for more wishes. Yes, each one of these tax tips will put you on better footing as you head into 2017. However, talking to a professional tax adviser can unearth numerous additional tax to-dos for your specific situation that can help you realize savings not only for the current year, but every year your business is in operation. Moreover, they can help you perfect the strategies we just discussed.
McManamon & Co. offers a host of tax services to small businesses, including helping business owners find substantial and legitimate tax savings for the current tax year, as well as setting you up for success down the road. We cover federal, state and local tax obligations, as well as payroll taxes for both business and owner alike.
And, of course, we tackle returns.
If you want to celebrate the holidays with a bundle of tax breaks, give us a call at 440.892.8900 or contact us online!
Tags: end of year tax planning, McManamon & Co., small business, taxes | Posted in McManamon & Co., small business, taxes