Now that the 3rd Quarter of 2022 is quickly coming to an end, it may be time to start thinking about scheduling a meeting with your CPA. Have you thought about what you need to prepare when it comes to your business taxes? Now is the perfect time to take simple steps to improve your finances and lower your tax bill with these Year-End Tax Prep Tips to Consider with Your CPA!
Develop good tax habits with these great prep tips:
Year-End Tax Prep Tips to Consider with Your CPA
1. Deductions
Make sure you talk to your certified tax professional to ensure that your business is taking full advantage of any deductions, write-offs and other tax advantages that you can take. A CPA will also help walk you through any changing tax laws and regulations that may impact your business deductions.
2. Categorization and Organization
Connecting with your tax professional will also help you get a handle on categorizing the various documentation. If you’ve been less than stellar with organizing your business items throughout the year, now is the time to organize those expenses to make things easier for your CPA. Help your CPA determine if you need to change your withholdings.
3. Don’t Wait Until the Last Minute
Set aside some time in your schedule each week to sit down and chip away at different tax planning duties you may have. Are you reconciling your different financial accounts and books regularly? Help yourself avoid penalties by being prepared and end the year on a high note. Tax prep time will just be that much easier for you and the CPA that you work with!
Also, book time with your CPA early and don’t wait until the last minute! The worst time to set up a tax prep meeting is during tax season! Some actions will need to be completed by a certain deadline, so ensure everyone has enough time to maximize any tax benefits for you and your business.
4. Review the Timing of Income and Expenses
Accelerating expenses and/or deferring income can be a tax plan to reduce your tax burden in the current year if your business can handle it, as can adjusting your salary. If you are paying for different expenses in December that could be paid for in the beginning of the year, you can potentially increase different expenses that can be deducted.
Similarly, if you delay payments that are owed to you until January that you normally would have collected in December, you could reduce your taxable income for the year. This all depends on a variety of factors, but it is something that you and your CPA can discuss to see if it’s an option.
5. Consider Making Large Year-End Investments
Deductions are always a welcome friend when it comes to filing your business taxes. One way you can do this is by making upgrades on your business equipment or by making capital improvements on your property. Only do so, though, if will help you improve the overall profitability of the business, otherwise it doesn’t make sense. Your CPA will be able to help walk you through a plan!
6. Charity Donations
Donating a portion of your business’ income to charity is a noble and important act, but it can also help you reduce your taxable income. Just make sure you keep receipts to back up all your deductions.
7. File year-end tax forms
While many tax forms for your business aren’t due until next year, there are important forms related to your business and the employees that will need to be submitted by year-end. These include:
- Form W-2 – Wages to employees and taxes withheld
- The Form 1096 – Contract worker wages
- Form 941 – Accounts for taxes paid to SS, Medicare, and income taxes
- Form 940 – Covers Federal Unemployment Tax
- 1050c – If your business provides health insurance for your employees, this will address which employees received coverage and can be used to determine tax credit eligibility.
8. Projected Payroll Tax Calculations
Work with your CPA to make sure your payroll taxes are up-to-date and calculated throughout the year.
9. Evaluate Your Accounting Process
The more organized and up-to-date your books are, the easier it will be to fill out your business tax return. That all comes down to your accounting process, where you can work to avoid mistakes and potentially receive a higher tax refund with no hassles.
Some options you have include:
- Manually tracking account information in a spreadsheet yourself
- Utilizing accounting software along with an accountant
- Hiring an accountant/bookkeeper to handle your books for you
Whatever may work best for your business, this is a great time of year to evaluate with your CPA how things are going and if it may be time for a change.
Year-end tax planning doesn’t have to be a stressful process. As long as you come up with a game plan and don’t put off your tax planning tasks, you’ll survive the dreaded year-end tax planning season. Please reach out if you should have questions or need any support.