Many small businesses, especially single proprietorships, have scaled-down accounting operations. If you’re one of those small business owners who work on simplified accounting, you should still make it a point to work on your taxes before the year ends. While everybody files income taxes in April, do remember that those taxes are for the income earned during the prior year. Hence, you should take advantage of the time until the end of the year to work on your income and expense accounts so you could cut down your business taxes come April. This should also provide you with the opportunity to plan your financial strategies for the next year.
Great Tax Tips for the Small Business Owners
While you may be excited about the upcoming holiday celebrations, do remember that you still have a few things to do for your business. Take a look at the following year-end tax tips:
Review the financial standing of your business.
There is no problem if you are handling the financial aspects of your business by yourself; many other small scale business owners do because they cannot afford an accountant’s salary. Just remember to take a close eye at your year-end profits because that will be the basis for your taxes. If you wish to pay lower taxes, then you have to show a smaller profit. You can do this by drawing as much as you can as your December paycheck. And before the year ends, make sure that you reduce the total amount you are depositing to your business account. Then, try to issue as many checks as you can to pay for all your business-related expenses.
See to it that all bills due in December are paid early.
Go over our bills one by one, and pay them all – rent, utilities, insurance, health care, as well as the Christmas bonuses you promised your employees. You should be able to increase your deductions and end up with lower taxes.
Now is the time to buy your office supplies and equipment.
One smart move is to replenish and perhaps even add to your office supplies before the year ends. Remember, your strategy to decrease taxes is by building up your expenses. The purchase of office supplies should do the trick for you. If you had earlier planned on buying some expensive office equipment like a new computer system, or renovating your office and buying new desks and chairs, you may want to execute your plans before the new year rolls in. However, make sure that your planned expenditures can be supported by your current cash flow. Moreover, everything that you purchase should be delivered, installed and in use before the end of the year.
If you are using the cash-based accounting method, you can delay the invoicing to your customers and collections from your sales until January of next year. This will effectively reduce the revenues booked for the current year that are taxable this coming April.
Some More Year-End Tax Tips
And if you don’t have one yet, you may want to arrange for your individual retirement plan. Not only will this help you prepare for your future, it can also provide you with tax shelter benefits. Still, you should realize that if you are running a home-based business, you are entitled to deduct portions of your home expenditures from your business taxes. Authorized deductibles include a share of the rent or mortgage payment, utilities, and other home maintenance expenses.
These year-end tax tips should be able to help you prepare for the unavoidable tax season. With that out of the way, you can truly enjoy the holidays with friends and families.
Home-based Business? How to Make Your Home Client Friendly
Should You Pay Yourself Salary or Dividends When You Incorporate Your Business?
Five Common Mistakes That Small Business Owners Should Avoid
Do You Know Why the CRA Uses a Profit Test for Business?
What is Income Splitting and How Can it Reduce Your Tax Bill?
Self Employed? Do You Know What Your Tax Obligations Are?
How Can You Claim Expenses on a Business Loss?
What are Input Tax Credits?