Small business owners of the world: congratulate yourselves on making it to the end of a tough financial year! Your business is still afloat, still running, and still profitable despite the gloom and doom we’ve all suffered through the last 12 months.
And there’s even more good news: we’re going to tell you about a few ways you can save money on your taxes.
Our end of the year tax tips have more to do with timing than than income level, which makes them perfect, across-the-board strategies for all types of small businesses. Using just one of these tips might save you serious money in the long run.
What You Need To Know
Every dollar spent, earned, and saved before January 1st is the business of the IRS come April 2010. Planning is everything. Getting a head start on preparations for tax day is a great way to tie up loose ends while maximizing savings for your business.
The most basic thing a small business can do to get ready for tax day is organize the books and update accounts to reflect the most current data. Doing so will give owners a clear idea of what they’ll be paying in 2010.
If you need help finding a great CPA or bookkeeper, contact us. We’ll refer you to someone perfect for you.
It’s easy to save your business money by employing on or more of the following tax saving strategies.
Start a Retirement Plan
If you haven’t already, think about creating a retirement plan. Payments can reduce your income and turn into real savings on your tax return for the following year. Different plans (Simple, SEP, etc.) have individual limits and deadlines, so work with your CPA or financial planner to select the plan that’s ideal for your small business.
Defer Income
This tip is good for small businesses that operate with cash. Basically, any income you earn through December will be taxable in 2010. Instead of accepting any pending income immediately, you may decide to defer payment until the new year. The money earned will not be considered taxable until 2011. This is an especially attractive option for small businesses that work with clients on a daily basis. Offer to defer payments on any services until the new year or simply send out invoices late in the month. Your business will save money and your clients will thank you for the extra time.
Go Shopping
Yes, this tip seems a bit backwards. However, spending money on your business before the year is out can increase the amount of tax deductions your business is allowed to claim. If you think you’ll need supplies in early 2010, buy the goods now and use them before the year is out. Purchase new equipment and clear out damaged inventory.
More tips to come. Stay tuned.
(And here it is: End of Year Tax Tips For Small Business, Part 2)
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This is great. I’m going to link to it from our blog. I found it because, while I’m definitely not a CPA (just ask my CPA), I get lots of questions from clients about this kind of thing. The deferred income tip is interesting. I think most small businesses I know are thinking “collect as fast as possible”. But it makes sense to collect in January if possible.