5 Tax Tips for Small Business Owners
The end of the year brings some common thoughts to the minds of small business owners … holiday hours, holiday special offers, time with family and friends, some well-deserved R&R, and taxes!
Since starting our home inventory business in 2004, we have had good years and some not-so-good years. Typical for the small business owner! We learned a lot over the years, and though we don’t claim in any stretch of the imagination to know about taxes (that’s why we have a CPA), we do know that we have a little control over the financial outcome at tax season. More profit = higher taxes. The good years are so much fun, but the tax bill can sting a little, can’t it?
If 2015 was a better year than normal year for you, there are some things you can do to lessen the amount you will owe. Before you do anything after reviewing your financials, call you accountant to discuss your options. Everyone’s situation is different, and what might work for some business owners could be a bad idea for others. Here are some standard and well-known actions you can take, and now is the time to review what’s best for you.
1 – Review your financials
One thing you can do now is to assess what your taxes will be. Cash flow is key for a small business owner to keep daily operations running smoothly. By planning ahead, getting a general idea of what your tax bill will be, you will have time to hold some funds back if necessary. Then, of course, rejoice in the fact that you had such a great year! It’s a great “problem” to have.
2 – Donate to a charity
Small business owners often find it difficult to sponsor an event, donate a service, or donate cash to a charitable cause. We all want to help, and there are so many opportunities – especially this time of the year. You’ll feel great because you gave to a worthy cause, and you’ll also enjoy the tax deduction.
3 – Buy stuff!
Office furniture, software, computers, printers, and equipment specific to your industry will increase your expenses, and decrease your profit. Thus, a lower tax bill.
4 – Control your cash flow
Prepay some of your bills. Do you have professional memberships that are due to renew in early 2016? Send payment now. Do you need to take courses to retain a certification? Sign up now. Is a trade show on your calendar? Register now. For the other side of the ledger, bill your clients late in December so you don’t receive the revenue until next year.
5 – Invest in yourself
As a small business owner, you have many savings plan options, so you’ll want to meet with your financial advisor. Contributions you make might be tax deductible. You still have time to make this happen, because you typically will have until your tax due date to contribute. Be aware that many plans have to be set up before the end of the year.
Before doing anything, first make an appointment with your CPA and financial advisor to discuss each aspect of your business. Only you and they know what’s best for you and your business.