It’s the end of the year and for most small businesses, that means it’s almost the end of the tax year. It’s always good to check in with your business and see how things are measuring up for the upcoming tax season.
A few questions to ask yourself:
- Is profit up?
- If your net income is higher than you expected, you may want to shed some of that excess on some expenses before the end of the year. Since taxes are cash-based you need to get all of your spending done by December 31st. Some options are: purchasing equipment, prepaying credit cards or vendors, give to charity, buy a business vehicle, set up a retirement plan (or feed the one you already have in place), or stock up on supplies.
- Did I properly estimate the taxes that are to be expected?
- If you want to avoid tax penalties, you should be sending in quarterly estimated tax payments. Check to see how much income you’ll be reporting, and see if you need to send in a larger estimate for your 4th quarter.
- Should I send in a state estimated tax payment?
- Paying a state tax estimate is beneficial for your federal return. If you do it before December 31st, you can deduct it with your itemized deductions. You won’t be penalized if you don’t send one in, but you will be rewarded if you do.
- How did we do compared to last year?
- Did you improve your profit ratios? What can you do differently to improve next year?
These are just a few questions to think about while preparing for the new year. There’s no need to be shocked in April. Prepare now so that you know what’s coming, and can sleep soundly knowing you are ready. Always consult your tax professional for personalized advice.