While everybody else gears up for the holidays, small businesses should have another thing in mind apart from sales: filing taxes. As the fiscal year draws to a close, it is important that business owners review the current financial situation and start implementing strategies to help minimize your income tax.
There’s no better time than the present to start planning which tax strategies are best for your business, for you to get deductions. Before the holiday rush, business owners should already have a plan in place. If you don’t have one yet, now is as good a time as any to come up with one.
Before you can even hope to come up with tax strategies, you need to make sure that all your accounting details are updated and accurate. This would give you a fair overview of the current financial situation of your company. Chances are, if you have a financial advisor or an accountant, they already would have given you some tips for lowering your income tax.
If you’re a DIY kind of person, you’re probably using accounting software to help you track your income and expenses. And if so, the accounting reports generated would have provided you with a summary of your tax deductions which would then help you make smart choices because tax strategies apply differently, depending on the financial state of your business.
As early as now, start gathering all your business related receipts. No matter how small the amount may be, it is important because it is the first step in maximizing your tax deductions. You may also want to defer your income, even for a few days. Let’s say you have collectibles for the last week of December, try receiving it in the first week of January instead so that the income would be taxable for the incoming year. You might think, “What’s the difference? It’s still taxable and I still would have to pay it.” The point is, your taxes are reduced for the current year.
One other tip is, if you’re planning on buying new equipment, supplies and other technological advancements for your business, you might want to purchase it before the year ends so that your tax dues would be lessened.
We are just a few months away from the annual filing deadline and the best time to get started on evaluating your tax strategy is now. Time is an integral factor in any plan. The longer you procrastinate, the lower your chances of discovering new opportunities. Because of the holiday rush, you might put off planning your tax strategies.
Before you know it, precious time has gone by and there will no longer be enough time for you to recoup your losses or maximize the hard work you’ve put in all year long. While it is true that paying taxes is inevitable, it is also true (and wise) to minimize the amount you will be paying by planning ahead.