As the year starts to wrap up, it is time to make sure you have done all you can to ensure you took care of your taxes this year. You can do many things to help your financial situation in regards to your taxes this year and next with the right planning.
Tip #1: Be Smart About Expenses
First, you will want to examine what tax bracket your small business falls into this year and where you fall within that bracket. You will then investigate what tax bracket, based on business projections, you will fall into next year. Use this information to determine if you should accelerate expenses this year or put them off until next year.
For example, you can use accelerated expenses to keep your business in a lower tax bracket this year, especially if you are right on the edge of a new tax bracket. Or you may want to delay expenses and put them off until the next year to help you land in the desired tax bracket next year. This decision depends on how your business is doing, how it is projected to do, and what tax bracket you fall into.
Tip #2: Consider Setting Up a 401(k) Plan for Your Business
Second, you may want to consider setting up a 401(k) plan for your business. With a 401(k) plan, you can claim tax credits to set up the plan and administer the plan on your taxes. You can also deduct your contributions up to a specific limit as business expenses. Contributing to retirement plans is smart for both individuals and employees, as both can enjoy tax savings this way.
Tip #3: Write Off Bad Debt
Third, sit down and review all your invoices for the year. Set aside any unpaid invoices, and then figure out if their debts will ever be paid or if you are better off writing off those bad debts. For example, if a customer is no longer active, it may be better for you to remove this customer's obligation, allowing you to remove those sales from your income. It is best to do this if you are sure you will not get payment from the customer in the future.
Work with a professional accountant to determine if any of the above tax strategies make sense for your business. You should also make sure you have all of your receipts and information to make the tax process easier for your accountant. Contact an accountant that offers tax preparation services to learn more.