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The end of the year is almost here, now Now is the time to cross these business imperatives off your list. Don't let the year end without maximizing your deductions, reducing your taxable income, planning for success, and protecting yourself from costly penalties and fees. Here are the top 10 tasks small businesses should complete before the end of the year.
1. Make a big purchase
The end of the calendar year means tax time is approaching. Consider narrowing down large business purchases before the end of the year so that you can claim the expense on this year's taxes without waiting for next year's income tax return and reporting the expense as a deduction and lowering your taxable income. The time has come. Don't wait to buy when you can take advantage of lower taxable income on your April income tax return.
Does your business need the latest equipment, supplies, and products? Does it need to be insured? Ready to upgrade your software, subscription, or membership? Maybe your business needs professional services from an attorney, bookkeeper, or contractor. Now is the perfect time to make such a purchase. This will reduce your taxable income.
Related: How to keep your employees productive at the end of the year
2. Contribute to a self-employed retirement account
Investing in self-employed retirement accounts such as Solo 401k and SEP-IRA is 100% tax-free. With your hard-earned money being self-employed, you can save on three types of taxes you would otherwise have to pay. Instead, funds invested in a self-employed retirement account can avoid federal, state, and self-employment taxes, which can result in significant savings. Self-employed individuals can contribute up to 25% of their net income, up to $66,000, to a tax-free self-employed retirement account (2023). Be sure to do this before the end of the year to lower your taxable income.
3. Prepare to send 1099s to independent contractors
If your company paid someone $600 or more in non-employee compensation, you are required to issue that person a 1099NEC and file the form with the IRS by January 31st. Now is the time, as this deadline is right around the corner. Make sure you have everything in place to prepare, issue, and file this important tax form. Make sure you collect a Form W9 from your workers to verify and collect personal or business information and verify their tax identification number.
Next, ensure that your records of payments issued to that employee are up to date on your books. If the total is $600 or more, you will need to prepare a 1099 NEC. Plan how you will create and publish this form. You can enter it manually, using payroll software, with a tax professional, or using an online service.
Related: 10 Smart Year-End Tax Strategies for Business Owners
4. Update your books and schedule your tax payments
Tax season is a tough time for businesses, so now is the time to get these books up to date. If you plan to hire a professional bookkeeper to handle your income taxes, schedule an appointment now. Once the tax year ends, tax professionals' schedules fill up quickly. If you do bookkeeping, take the time now to review your financial records, receipts, and accounts for the year and organize them for year-end and tax preparation.
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5. Plan your bookkeeping method for next year
As you review your financial records for the year, you may realize it's time for a change. Hiring a professional to handle your bookkeeping is always a good choice. If you're ready to entrust this complex task to a tax professional, we recommend planning and choosing your bookkeeper before the new year begins so you can get a fresh start together. Masu. At the beginning of the new year without updating financial records. Membership fees, professional fees, and the cost of new accounting software are all tax deductible, so if you can pay them upfront, you can add them to your tax deductions this year.
6. Plan for entity and tax election changes
As your business grows and evolves, you may need to switch entity types or change your tax election. Forming an LLC or corporation and choosing your tax status is often much more difficult to change mid-year and can complicate your tax returns and records. Additionally, IRS tax election changes (such as electing S-Corp tax status) are time-limited and must be made before May 15th.th In most cases, deadlines. Evaluate whether your current entity type and tax election is the best choice for your business. Consult with a certified professional, such as a certified public accountant, financial planner, or attorney, to plan for upcoming changes so they can be implemented at the beginning of the new year.
7. Cancel unused memberships and subscriptions
As business owners, we often have the ability to sign up for subscriptions, memberships, and services that renew monthly or annually. These may have been useful at one point in your business, but you don't need them now. The end of the year is a great time to check your bank account and audit what you're being charged for subscriptions you no longer need. Check your tax, registration, and important filing deadlines with the new calendar. Don't be surprised if your business has so many taxes, business registrations, and important filings to complete. Organize a calendar of important filing, payment, and renewal dates today to help keep your business compliant and legally operating without costly fines and fees. This includes:
- Business license renewal
- Estimated amount of income tax
- Consumption tax declaration and payment
- LLC tax payment
- Submitting an LLC Information Statement
- Payment of unsecured business property tax
- Payment of business insurance premiums
Related: Are unused travel card benefits actually a bad thing?
8. Plan your goals
Plan short- and long-term goals for the coming year, breaking down big goals into small actionable steps that need to be planned in advance. What is the next big step towards growing your business? What is the next step to building a sustainable and profitable business? What steps can you take to spend more time growing your business? Can you outsource or hire tasks? How can you continue to build a life you love while providing valuable products and services to others?
Start by auditing the current state of your business and think about where you want it to be at the end of next year. What goals do you need to get to that point? Then break those goals into smaller steps and create a plan for smaller goals for each month of the next year. By starting the year with small, doable goals that seem easy to achieve, you'll be able to consistently take those small steps that will lead to big changes over time. Knowing these small goals in advance will help you plan the tools you need to reach them.
9. Last but not least, celebrate yourself!
Finally, take some time to reflect and enjoy what you accomplished over the year. Whether your business growth has been immense and impressive or slow and steady, reflect and review the positive parts of your accomplishments.
All your work deserves recognition. Take time to remind yourself that you are adding your contributions, gifts, talents, services, and opportunities to the world. Then your efforts will be rewarded.
