When the year begins to wind down, many small businesses wonder if there are any last-minute tax tips that can save some money when they pay taxes. 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. Here are some strategies that can work for year-end planning, but can also come in handy at any time throughout 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.
Save Money for Your Business
Owning a business not only gives you the luxury of working from home and having your own schedule, but you can deduct things you may not have ever dreamed of like the car you purchased for your Uber business, supplies, and electronics. If you made purchases that are directly related to your business you can deduct them from your business income and save money for you business. You also may want to think about purchasing that iPad and other computer equipment you’ve been needing for your business before the end of the year.
Make a Donation
Just like individuals can make tax 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 them. 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.
Retirement Plan Contributions
The easiest thing you can do is to make a retirement plan contribution. 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. Bonus tip: If you are self-employed you can contribute to a SEP IRA and save on your taxes. A SEP IRA is a type of traditional IRA for self-employed individuals or small business owners. Business owners with one or more employees and anyone with freelance income, can open a SEP IRA.
The advantage of a SEP IRA over a traditional or Roth IRA is a larger contribution limit. For 2016 business owners can contribute up to 25% of income or $53,000, whichever is less. In addition, contributions are tax-deductible for the business.
Save on Health Insurance Premiums and Your Taxes
Although you may not have the luxury of having employer provided health insurance, you can purchase in the Health Insurance Marketplace or your state Marketplace during open enrollment and may find that you are eligible for an advanced premium tax credit to help you pay for health insurance. There’s an additional bonus, you can also deduct premiums paid as a business expense.
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 there are tools to help you easily organize your business income and expenses like QuickBooks Self-Employed.
Don’t worry about knowing tax laws for self-employed. At tax-time, TurboTax will ask you simple questions about your business income and expenses and give you your business tax deductions you deserve based on your entries. You can also use QuickBooks Self-Employed, which will help you separate your business and personal expenses and automatically export the information to your tax return in TurboTax.