For most small business owners, the end of the fiscal year corresponds to the calendar year. So if you’re a small business owner, year end is the perfect opportunity to review your records and analyze your business results in order to make strategic plans for the future. Your accountant can help you prepare your taxes as well as aid you in planning for future success. For my clients in the Horsham and Abington areas, tax exposure is minimized. Here are the issues we discuss on a regular basis with them:
Records of Income & Expenses
Have you recorded all your receipts and business expenses? Have you invoiced all work completed? Getting your income and expense records up to date is critical in order to ensure correct tax filings and to make accurate forecasts and goals for the future.
Ensure that all work completed has been invoiced, but discuss with your accountant if you should delay receiving income to the new year in order to maximize tax benefits. If it’s best for you to increase your income now, send reminder invoices or contact customers personally to collect payment in the current fiscal year. Consider if any of your outstanding debt should be written off as bad debt, which is a deduction.
Count your inventory and review costing. If the value of your inventory has gone down, you may be able to take a deduction. Review your expenses to confirm that fixed assets have been recorded as such. Fixed assets can be depreciated over a number of years or, under certain circumstances, can be expensed entirely in the year purchased. So again, discuss with your accountant which method would be to your advantage.
Have you recorded all business deductions that are available to you? Take a look at Self-Employment 101: What Counts as a Business Tax Deduction and Small Business Travel – What Is Deductible for helpful lists.
Charitable contributions can be written off at fair market value, whether cash or physical items. However, be aware that there are limits so discuss this as well.
Employees and Contractors
Make sure you have all the required paperwork for both employees and contractors, such as W-9 forms and information for 1099 and W-2 forms. If you are going to offer end-of-year bonuses to employees, make sure you withhold taxes. Year end is also the time to contribute to your employees’ or your own 401(k). Max out your contributions, if you are able.
Review your quarterly tax payments and compare them to your expected net income by the end of the year. How much do you have left to pay? You may owe more or less than you originally anticipated.
Meet with Your Accountant
Meet with your accountant before you close your books if you need to decide on some of the questions already mentioned. If you have already completed these steps, you are ready to take the necessary information to your accountant in order to analyze your results for the year and make plans for the future.
Reach out to us here at Koelle and Associates, CPA. We have been providing accounting and financial advice to individuals and businesses in Willow Grove and surrounding areas for over 30 years.