It’s that time of the year again
Two things are sure in life: Death and Taxes. If you are reading this article, I am going to assume that you are not dead. That means you are here for tips on taxes, in which case, you came to the right place. Since I am not an accountant (nor do I play one on TV), it is always prudent to check with your tax professional to confirm that this advice matches your unique situation and tax bracket.
1. Increase Expenses, Decrease Revenue
Reducing the overall profitability of your company reduces your tax exposure for this year.
Making business purchases that you were planning for next year. This allows you to deduct them this year, which reduces your total income.
Loss-harvesting, or selling of bad investments to realize losses, allows you to decrease your taxable gains up to $3,000. Any losses above that number may be carried to the next year.
Deferring Revenue received for services or goods not yet delivered to the year that delivery takes place. Depending on your income levels each year, this could lead to large amounts of tax savings.
Depositing revenue from December in January. This will show less income for this year which means you get taxed less.
2. Maximize Deductions
Check your tax code to find deductions you may have missed. The IRS has built in several common business expenses that are easy to take advantage of.
Mileage, Travel, and Auto Expenses.
The IRS allows you to deduct 57.5 cents per mile for eligible business travel as well as parking and toll fees.
Automobile depreciation and repairs are deductible as long as they are business expenses.
Eco Credits and Deductions
Installing Eco-friendly systems and equipment often qualifies you for deductions that you may not have taken advantage of in the past.
“Company Benefits” and Charitable Giving Deductions
Contributions to your retirement, flexible spending, and health saving accounts as well as charitable contributions are all tax deductible.
3. Minimize Exposures To Penalties and Audits
There are several things you can do to protect yourself in case of an IRS audit.
Don’t take a deduction or credit unless you can prove it. Keep all receipts and records. If you can’t prove it to the IRS, it didn’t happen.
If you have tax-exempt customers, confirm that their information is up to date. Tax-exempt filings are extremely easy for the IRS to confirm. Out of date and incorrect information can trigger a huge red flag for closer inspection.
Review all reports and filings for accuracy. Double-check, triple-check, have your friend check, and then check again. The easiest way to prevent the IRS from finding errors is to eliminate them.
Double-check that your payment to the Department of Revenue was processed. If 2-3 months have gone by and the IRS has not cashed your check, follow-up to ensure that they received it in the first place.
You did it!
Congratulations on making it through another year! Taxes are always the least glamorous part of running a small business. However, taking some extra time to review them now can not only save you money in the short term, but also set you up for next year and beyond.