Tax planning before year end: five steps for small business owners

The year is almost over, and that makes it a good time to look at your taxes. Tax planning before year end gives you a chance to review what the year brought in, what it cost, and what comes next. The steps below are general. Your situation is specific, so talk with a tax professional before you act on any of them.

1. Review your income and expenses so far

Start with a year-to-date view of what your business earned and spent. Check that every sale, invoice and expense is recorded and sorted into the right category. Missing receipts and uncategorized transactions are easiest to fix now, while the year's details are still fresh.

2. Estimate your tax bill

With the year-to-date numbers in hand, estimate what you may owe. Compare that estimate with the estimated tax payments you have already made. If you are self-employed, or your income has no tax withheld, the fourth quarter estimated payment for the year is generally due January 15. Knowing the gap now leaves time to plan for it.

3. Review retirement and other contributions

Some retirement plan contributions must be made by December 31. Others, such as certain IRA contributions, can often be made until the tax filing deadline. Deadlines depend on the type of plan and on how your business is set up, so check the rules for each account before you act.

4. Think about timing for equipment and major purchases

Buying equipment or other business assets before year end can change how those costs are deducted. The rules for depreciation and expensing are detailed, and they change over time. Ask before you buy, so the timing fits your plan.

5. Get your records and forms in order

Good records make filing faster and easier to check. Gather your receipts, mileage logs and bank statements. Make sure you know which forms you will need in January. If you paid contractors, you may need to file 1099 forms, and forms such as 1099-NEC and 1099-MISC have a January 31 deadline.

Put the plan into action

Tax planning works best when it starts early, before the year closes. Going through these five steps each November gives you a clearer picture of the year ahead. Moore Financial Services offers tax preparation and tax planning for individuals and small businesses. You can learn more on our Tax Services page.

This article is general education, not individual tax advice. Your options depend on your own facts, so speak with a qualified professional before you decide.