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The end of the year is approaching and that means you will realize that “the accountant for my small business is going to need my tax information soon.” For some small business owners, that can send them into a panic as they realize they have not thought about taxes since they were filed earlier in the year. These tips from TMD Accounting can help you begin to prepare for tax season and help you stay prepared all throughout the year.

Review Your Income

This is the time to review your income over the past year, according to small business accounting services. During the pandemic, you may have seen your company income drop but now that things are getting back to normal, your bottom line may have improved substantially. For some businesses, however, the inflation has kept their profits lower than expected. If you have seen an increase in net revenue this year, now is the time to look for additional tax deductions to lower your tax burden after the first of the year. By the same token, if your income is lower than you expected, you may find yourself eligible for additional deductions you were not eligible to use in the past.

Check Your Business Entity

This is the perfect time to review whether you are using the right business entity, whether you are a sole proprietor, S-Corp, LLC, partnership or C-Corp. Even though you may have had the same entity for years, your income level can have an impact on which option is best for you. If your company is bringing in $50,000 or less, it is likely that you will not want to go through the process of becoming an S- or C-Corp. If this is your current business entity, you may want to talk to a small business accountant to see if it is time to change. If your company has done exceptionally well this year, you are reaching six figures in net revenue, but are still a sole proprietorship or partnership, you may want to ask, “can the accountant for my small business help me change my business entity?”

Review Retirement Plans

If it looks like you will owe a significant amount to the IRS this year, consider reviewing your retirement plans. This is the perfect time to invest in retirement plans such as an SEP IRA or a Solo 401(k), depending on your business. You could even combine a 401(k) with a Cash Balance Pension Plan. Although you will still be writing a check, it is much preferable to write that check to yourself in order to use it in retirement than it is to write it to the IRS. At TMD Accounting, we can help you create a retirement account that will not only prepare you for your golden years, but also reduce your tax burden.

Are You Working from Home More Often?

One of the things that came out of the pandemic was a realization that working from home can be an option for many people, even business owners. If you have moved some of your operations to a home office, you may be eligible for the home office deduction, even if you were not eligible in previous years. The answer to the question “can the accountant for my small business tell me if I can take the home office deduction” is absolutely yes, but there are a few things you need to know. In order to take the deduction, you must meet certain criteria, so talking to your accountant is the best way to determine if this is an option. If you can take the deduction, you could save hundreds if not thousands on your taxes.

Take the Time to Get Organized

December is the time to get all your business finances organized. Pull out the shoebox of receipts and begin organizing them. The best way to do this is to sort them into piles related to your deductions. For instance, create a pile for office supplies, one for meals and entertainment, one for vehicle costs related to business and so on. Even if you use an electronic financial system, organizing your backup documentation can be beneficial should the IRS flag one of your deductions. The best way to do this, however, is to do it all year so that it does not feel so overwhelming at the end of the year.

Consider Deferring or Accelerating Income

Did you do a large project for a client that could be billed in December? Consider delaying the invoice until January which allows you to defer the income, so it is taxable in the next tax year. However, if you believe your tax rate will increase next year due to higher net revenue, you may want to accelerate the income by issuing the invoice as soon as possible and trying to get payment from the client before the year ends. You can do the same with your expenses. If you expect your tax bracket to be higher next year, you may want to delay paying any expenses you can until after January 1. However, if your tax bracket is higher this year than it will be next year, try to pay as many expenses as possible before the end of the year. A small business accounting service can help you understand if accelerating or deferring income and expenses would benefit your tax situation.

If you are in need of an accounting services, we here at TMD Accounting are ready to help you. We have over 40 years’ experience in the tax industry, are family-owned and operated, working under the motto that “numbers matter and people count.” Arrange for a no obligation consultation by calling 1-856-228-2205 or fill out the easy online form today.