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- iHaveNet.com: Small Business Guide
Small Business Money Matters
Reviewing your small business finances in the fourth quarter of the year helps provide small business owners with the greatest chance of taking action to lower the year's tax liability.
Once the New Year begins, many options for lowering a tax bill are no longer available. Small businesses that wait until March or April to plan for taxes often miss out on many of the best options for reducing what is owed.
The first step of this review process is to meet with your accountant to assess your likely tax situation. With a sense of your liability, you may be able to lower it by taking one or more of the following steps.
Tax Savings Tip: Accelerate expenses
Move anticipated business expenses for next year onto this year's books as a way to offset current income.
While you don't want to interrupt your company's cash flow, there are likely a number of operating costs that can be pushed up. For example, you may be able to prepay several months' worth of office rent, insurance payments, or deductible interest on business loans. If you expect to travel for business, set up and pay for trips that will occur after the beginning of the year. Similarly, you can speed up state and local tax payments -- first quarter estimated taxes, often due on January 15, can be paid before the end of the year and used against this year's income. Remember, however, that any expenses that are shifted into the current year cannot be taken again next year.
Tax Savings Tip: Delay income
In addition to moving expenses forward, your company can also put off income.
If your business expects to have significant billings to customers at or near the end of the year, you might want to delay these invoices until the following year. This can help reduce the amount of taxable income you have for the current year.
Tax Savings Tip: Max out your Section 179
Consider taking full advantage of the IRS Section 179 deduction, which allows you to write off the full cost of certain equipment purchases instead of depreciating them over time.
If you plan to buy business equipment such as computers, fax machines, copiers, phone systems, or other fixed assets in the first several months of next year, consider pushing up the purchases into your current year to get you as close to the first-year expense limit as possible.
Tax Savings Tip: Create and contribute to a retirement plan
Make tax-deductible contributions to an employer-sponsored retirement plan.
If you company doesn't have one, set one up. Both Keogh plans and 401(k) plans must be set up by the end of the tax year, although contributions often can be made up until the due date of your business' tax return. A Simplified Employee Pension (SEP) plan can be created as late as the due date of your tax return (including extensions).
Tax Savings Tip: Put bonuses on the books
Businesses that use the accrual method of accounting can record (and deduct) employee bonuses before the end of the year, but can pay them any time within the first 2 1/2 months of the following year.
Generally, the amount of the bonus and the employee's right to the bonus must be established before the end of the year, but payment can be made the following year as a form of deferred compensation. Companies that use the cash method of accounting can only deduct employee bonuses in the year they're paid.
Tax Savings Tip: Review outstanding debts
Make an effort to collect long outstanding debts before the end of the year so you can record them as "bad debts" before the close of the year.
For companies that provide goods, bad debts are generally considered to be a deductible business expense if they are noncollectable. If you sell services, however, you may not be able to deduct an unpaid bill as a deduction
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
Small Business Money Matters - Year-End Planning for Tax Savings
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