Maximizing Your Year-End Tax Savings
Maximizing Your Year-End Tax Savings
The final weeks of each year can be the busiest of all if you’re a small business owner. As you’re closing out the books for 2013, remember that the last weeks of December are prime time to get your taxes in order. Here are five important tax tips for small businesses, as vetted by Loudoun County, Virginia CPA Jim Snyder.
1. Hire a pro now
It goes without saying that without knowledge and organization – what happened to those receipts you meant to file anyway? – taxes will end up costing your business more money, and causing you more frustration. Now – not April — is the time to hire a professional tax accountant who can help you separate personal from business expenses, and create a plan for success in 2014.
“The time to plan is before the year ends. We are really limited to our tax strategy options once the tax year is over,” explains Snyder, “In addition, knowing how much cash you will need for taxes for April 15 now will better help meet your cash flow needs this spring.”
2. Throw a holiday party
Many of the expenses associated with a party – so long as it meets a “reasonable,” business-focused threshold according to IRS standards – can be a tax deduction. Here are a few tips for holding an inexpensive party for your business. Don’t forget those office holiday parties for your employees are not subject to the 50 percent meals and entertainment deduction rules!
3. Feel free to give holiday gifts, but give wisely
The IRS only allows up to a $25 deduction per gift to any one business client or associate per year. While more expensive gifts may earn you appreciation, there’s no net gain for your additional generosity come April 15. In some cases, a gift of sports or theater tickets may receive a better deduction using the 50 percent entertainment rules, regardless of whether you attend with the client.
4. Remember those in need
The Small Business Administration estimates that, on average, small businesses donate six percent of their profits to charity. Cash, volunteer costs, sponsorship of local charity events, or donating inventory can all be deducted from business taxes, so long as IRS rules are followed. Charitable contributions may be limited for some businesses. Sponsorships may also qualify for an advertising expense deduction, which is not subject to limitation.
5. Don’t forget about your own retirement
Multiple options exist for setting up programs that lower your taxable income, ranging from the SIMPLE IRA and “solo-401(k)” all the way to defined-benefit pension plans. Some plans can be set up as late as April 15 – but consider doing it before 2013 is over.
Content contributed by Susan VanEpps, Loudoun County, Virginia. Loudoun SourceLink is a proud affiliate of U.S.SourceLink, America’s largest resource network for entrepreneurs.
