7 Smart Year-End Tax Actions

The end of the year is creeping up quickly and business are wondering what are some smart year-end tax actions to do before the fireworks and champagne ring in the New Year.

1. Don't spend money that you wouldn't ordinarily spend just to reduce your tax bill. Remember, $1 spent does not equal $1 worth of tax saved: $1 spent creates a $1 deduction, which (depending on your tax bracket, business structure, and state of operation) will only lead to $.00 - $.60 worth of tax saved. So, while tax deductions are great for businesses to fully utilize, they never provide an equal return for the dollars you spend, in order to get that deduction - which means you should never wastefully spend money just to increase your deductions.

2. Consider accelerating income and/or deferring deductions. These actions come into play as a way to increase the amount of income that's taxed in the current year. This may be a useful strategy if your income falls in a lower tax bracket this year compared to what you anticipate for the upcoming year.

3. Perhaps you should defer income and/or accelerate deductions. Choosing this option functions to decrease the amount of income that's taxed in the current year. You would choose this route if your income falls in a higher tax bracket this year compared to the next.

4. Review the financial health of your business with your accountant. Many accountants will help you analyze your profit and loss statement and balance sheet to identify year-end tax strategies that are appropriate for your business.

5. Review your business structure to decide if a different choice is more advantageous. Freelancers often work for themselves without any formal business structure, also known as "unincorporated" or “solopreneur.” This may be where you started by other possibilities, such as forming a corporation, partnership, limited liability company, or another formal structure might be a smarter choice at this point moving forward.

6. You'll want to set up a plan for tax payments due next year. This includes the 4th estimated tax payment due by January 15th, the extension payment (if any) due by April 18, and the first estimated tax payment for 2017 which is also due on April 18.

7. Get organized, update and protected. Starting fresh in the New Year always makes for better results so spend a little time cleaning out the papers, files and cupboards. Consider scanning and saving and tossing the tangibles. Technology dates itself rather quickly so reaching out to IT experts to see what is still running strong and what needs updating is worth the effort. Handling software application updates and running a final network backup will save you from headaches in the New Year. Finally, be sure your insurance policies are up-to-date for the New Year; you may not finish in the same place you started so reviewing policies is critical.

Lastly, take time to look back and see how far your business has come. Set some goals for the upcoming months. Thank those that helped you reach your successes so far. Remember being in business shouldn’t be all about the business it should include nurturing yourself and having fun along the way.


Some tips originally posted at www.thebalance.com