Year-End Small Business Tax Tips

Tax Planning

When the tax year begins to wind down many small businesses wonder if there are any last-minute tax tips that can save some money. After all, once the year is up you may lose the ability to claim certain deductions or benefits so it makes sense to ensure you’re taking advantage of every opportunity available. So, here are some strategies that can work for year-end planning, but can also come in handy at any time throughout the year.

Year End Business Tax Tips
Year End Business Tax Tips

Retirement Plan Contributions

Let’s not ignore the obvious, but the easiest thing you can do is to make a retirement plan contribution. Whether you’re using a Traditional IRA or Solo 401k, any pre-tax contribution before the end of the year will result in reducing your taxable income and provide a little relief. As long as you haven’t already maxed out your contributions this is a no-brainer. Don’t have a retirement account? Then set one up and make a contribution before the end of the year!

Take Advantage of Cash Accounting

Many small businesses employ cash accounting. This simply means you don’t pay tax on income until you receive it, and you can’t deduct an expense until the money is spent. So at the end of the year you might be able to accelerate a purchase before the year ends or tell a customer they can wait until January to pay their invoice. Structuring when money comes in and goes out at the end of the year can provide a little tax help.

Accelerated Depreciation

Take advantage of accelerated depreciation while you can. Certain large purchases can significantly benefit from this accelerated depreciation, but it may not be available forever. Congress will be looking at this benefit in 2012 and it could be scaled back significantly.

Make a Donation

Just like individuals can make deductible charitable contributions, so can businesses. You have until December 31st to make those contributions, so if you’ve got old office equipment or other items going unused, find a place to donate it. If you’re simply looking to make a cash donation you can find a number of worthy charities as well. As long as it’s a qualified charitable organization and you maintain proof of the contribution it will count.

Get Organized

While this might not put money right into your pocket, it can save a lot of time. And time is money. Use the end of the year to get your business finances organized. Sure, you may not need to file for a few more months, but waiting to get all the paperwork and figures together as time runs out is far more stressful than it will be to start before the year is even up. It’s always better to have more time to deal with an error if you spot one.