A lot of things pop up for small businesses at every end of the calendar year. This is the right time to start thinking when you feel that you want to achieve something for the next year and work on the process of the goal you have set. Eventually, the time to start closing out your books for this calendar year as you have your holiday shopping for your employees, vendors, clients, and colleagues.
If you also feel that there is anything you should be doing to make your business ends healthily in this fiscal year, right now is the best time for you to check-in with your accountant. You can absolutely make a big difference in your total income and tax liability for the year from that few small changes you may have done.
Here are some important year-end tax preparation steps for you to get started taking in order how to close out the year financially and take advantage of additional deductions.
Whatever will be your answer to this question "How was your year financially? " will really matter most when you are already in your way to your goal setting process and ensuring up-to-date and accurate books. All of the relevant reports for your business including the scheduled time to walk through it must be run and done by you together with your accountant of course in case you need more explanation on the figures and specific breakdowns in it.
It will still be considered as your current year income that you will be received by December 31. Depending on where your income levels are each year, you can really save a significant amount of money if you shift income after January 1, delaying it from being counted as income until the following year. So to cut your tax bill, ask your accountant if it makes sense to defer December payments until January.
In order to maximize deductions, spending money in this very time on items that your business needs would really be appropriate. So it will be best if you make a list of purchases you can make now to get the most out of your deductions like if your equipment needs to be upgraded or you wanted to stock up on office supplies or are there vendor payments you can make in advance; then go on! Do it!
You may be able to claim additional deductions if a drop in the market value of your inventory is observed. You really have to check with your accountant since it will also depend on the accounting method you've used whether it makes sense for your small business.
In order to reduce your income for this year, you have to make payments to your retirement plan or set one up before December 31. Max outing your contributions is somewhat appropriate to do now. To start with, talk to a financial advisor to determine which plan is best for your business just in case you haven't yet set up a retirement account.
Establishing good ideas for business finances is also a great thing to do during the holiday season aside from making a charitable contribution from your small business. The good thing is you don't have to donate money since you can freely give items such as clothing, toys, and other goods. The fair market value from those things you have donated will enable you to claim a deduction but just be sure that you have properly documented it and secured a receipt for records purposes.
Think that most rates will be similar to the tax rates for 2019 if you are planning for 2020. This is based from fact that IRS has already announced few small adjustments to brackets and retirement plan limits for 2020. Thus, even we choose a new president in the November election, an agreed decision to enact a retroactive tax change for 2020 must be wisely done by the new president and the congress
In order to reduce your income for this year, you have to make payments to your retirement plan or set one up before December 31. Max outing your contributions is somewhat appropriate to do now. To start with, talk to a financial advisor to determine which plan is best for your business just in case you haven't yet set up a retirement account.
By 2025, many of the current changes from TCJA are expected to last. Supposedly, TCJA is a huge win for all taxpayers but since it only benefits the super-rich and has shafted many in the middle class; many have complained about this. For now, a new tax cut for the middle class has been in the mouth of Trump but regarding how that would be paid for is for anyone to guess.
Your income and deductions could become more valuable if you have done it with proper timing ( from tax planning). Your portion of the business profit and deductions are passed through to you if you are using a pass-through entity (Sole Proprietor, S Corp, LLC, or Partnership). Eventually, this will be taxed on your personal tax returns. From your overall household income and filing status comes the basis for your taxes.
With a few small adjustments for inflation, the 2020 federal income tax brackets are similar to the 2019 brackets. You may want to try and defer some income into 2020 if you are expecting to have a similar or expecting that tax bracket next year will be in its lower bracket.
At the very least, this kind of tax-saving strategies like moving some tax deductions up into 2019 can help defer some of your taxes from 2019 to 2020; giving you a little more time to pay Uncle Sam.
But then if you are expecting to be in a higher tax bracket in 2020, then take the opposite approach. In this, you may delay some deductions until 2020 or you may also accelerate income where possible into 2019. By means of this, you would have more income taxed this year (2019) and end up the two years combined with an overall lower net tax rate.
One of the best ways to increase the net profitability of your small business is by minimizing taxation with politics aside in it. And for you to develop a strategy to make proactive tax planning choices that will help you keep more of your hard-earned money, be proactive and work with your certified financial planner and CPA.
Now for the retirement accounts, two choices are given for you to choose - would you rather write a check to yourself or the IRS? You decide!
CONTINENTAL TAX AND ACCOUNTING SERVICES