This time of year for binge eating turkey, holiday cheer, and year end tax planning! Now is the time to rack up those deductions and to get your books in order for a smooth tax season come April. For all my startups and freelancers out there, use this list (and check it twice) before NYE comes.
My Year End Tax To-Do List
- Review Payroll. Make sure to put any additional federal and state income tax withholding through your payroll system. These will be treated as paid evenly throughout the year and will help avoid late payment penalties. Also, think about year end bonuses and salary increases so January's payroll is nice and clean.
- Retirement Contributions. Technically you have until you file your return to make tax deductible contributions but if you own a business and want to set up a new retirement plan through your business (like a 401k) you need to get the paperwork in ASAP. These plans have some huge benefits over a normal IRA so discuss with your CPA and CFP.
- Maximize Tax Deductions. To get your benefit now, make sure deductions are paid before Jan 1. The biggest ones: State & City income taxes, charitable contributions, and property taxes.
- Defer Income and Prepay Expenses. Since most small businesses are on a cash basis, waiting to get paid in Jan moves your taxable income to the following year. Similarly, prepaying expenses before Jan 1 gives you more deductions today. This trick is an oldy but a goody; use it if you can.
- Get your books in order! This isn't so much a tax saver but a time saver. Waiting to clean up your books after 12.31 can be a nightmare. Plus, without good records, you may not know if you're making money or losing money; so how can you possibly plan effectively?? Gather those receipts. Reconcile your cash. Chase down Account Receivables. Get it together!