It may be the most wonderful time of the year, but tax season is just around the corner. December 31 is an important deadline for your business’ taxes and finances. Before you start ringing in the new year, make sure your business is ready to close the year successfully.
Review your year
Use your accounting software to generate reports that show you how well your business has performed in the past 12 months. Did you meet the goals you set this time last year? What do you need to do financially to achieve your goals? Take time to reflect on how your year has been. From there, set new goals for your business.
Make big-ticket purchases
If you have your eye on an expensive business purchase, now is the time to make it. Not only are merchants offering excellent year-end deals, but a big purchase also benefits you come tax time. Any purchase made before December 31 can help you maximize your deductions on your return next spring. Go ahead and upgrade your technology or buy new equipment; you’ll be doubly happy that you did.
Defer pending income
Any income you receive before December 31 counts on your upcoming tax return. If you are able to defer December payments until January 1, it could end up saving you quite a bit on your tax return. Talk to your accountant about whether this makes sense for your current financial situation.
Invest in retirement
Make payments to your retirement fund before December 31 to reduce your annual income. If you haven’t hit the maximum contribution for the year and are able to afford it, transfer more funds into your account. If you don’t have a retirement fund, create one before year’s end. A financial advisor can help you create a plan that makes sense for your business and personal situation.
Check your inventory
Year’s end is a good time to evaluate what you currently have in terms of inventory to help you start the new year fresh. It’s also a good time to check if any of your inventory has depreciated in value. If it has, you can claim a deduction on the lost value. This won’t apply to all business, so check with your accountant first if you’re only conducting an inventory check for tax purposes.
Donate to charity
The holiday season is the perfect time to make a charitable donation. Fortunately, it also lines up with the end of the tax year. You can take a deduction on the amount you donated to a 501(c)(3) charity. Light on cash? You can also donate clothing, toys and goods and claim a fair market value for their donation. Be sure to get a receipt so that you have proof of your donation.
Prepare for next year
Don’t let another tax season strike fear into your heart. Get a head start by updating the way you manage your business’ finances. Try a new software system or consider outsourcing your bookkeeping to a financial professional who can keep your business’ books running smoothly.
MCG Solutions is ready to help your business start the new year financially strong. Contact us today to learn more.