Tips for Small Business Year-End Tax Planning


Planning is the key to successfully and legally reducing your tax liability and is a critical part of a small business owner’s financial plan. Yet, the majority of small business owners ignore tax planning. There are many tax planning strategies available to small business owners – below are a just a few:

  • Review Your Expenses:Check to be sure you have accounted for all expenses and entered them into your accounting system. Implementing a good filing system, whether digital or paper, is key to making sure you can easily locate and organize all of your business expenses. The fourth quarter is also a good time to review your business needs such as equipment, computer and office supplies, so you can maximize expenses and offset your taxable income.
  • Understand Your Deductions: Many small businesses do not fully understand reporting requirements for a tax return. For example, many owners may not be aware that the tax code only allows a 50 percent deduction for meals and entertainment. However, there is an allowed deduction of 100 percent for specific meals, like holiday parties, or when an employer provides a meal for employees at work, for the employer’s convenience. Knowing how to track these items during the year will ensure the best possible deduction.
  • Defer Income Where Possible:consider waiting until near year end to send out some invoices to customers. That will defer some income until 2016, because you won’t collect until early next year. Needless to say, this idea should only be used for customers with solid payment histories.
  • Review ACA Requirements: The implementation of the Affordable Care Act (ACA) will affect some small businesses this year. The most notable issue for many businesses is that they could face tax penalties for failing to provide health insurance to employees or for failing to report to the Internal Revenue Service what type of coverage they have provided for employees. Since the start of 2016, businesses with 51 to 99 employees are required to offer health insurance to at least 70 percent of their full-time–equivalent employees or face a tax penalty of $2,000 per employee. Business owners should understand the reporting requirements that come along with the ACA, in order to avoid tax penalties.The act requires employers to report, on each employee’s W-2 form, the cost of the health coverage the employer provided. A breakdown of what the employer and the employee each paid is required in Box 12 of the form. Failing to report this information could lead to fines of $200 per employee.
  • Make a Charitable Contribution: Making a charitable contribution from your small business a great thing to do during the holiday season and it can also be a good idea for your business finances. You don’t have to donate money. You can also donate items such as clothing, toys and other goods, and claim a deduction for the fair market value. Make sure you properly document all charitable giving with receipts.

We go beyond tax compliance and proactively recommend tax saving strategies to maximize your after-tax income. We make it a priority to enhance our mastery of the current tax law, complex tax code, and new tax regulations by attending frequent tax seminars. Set an appointment today to review your tax-planning strategy. Making adjustments to your strategy NOW ensures you pay the lowest possible tax for this year.

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