As the end of the year approaches, this is a great time to start thinking about the year-end processes. Taxes are like a four-letter word for most people, but a necessary evil. What I am going to do with this article is help you sort out what needs to be done.
I want to start out by suggesting that you maintain a spreadsheet of all of your income and expenses as they occur. If you need help setting one up, feel free to contact me. This will make your life a whole lot easier when it is tax time.
Another suggestion that I have is that you scan all of your receipts. With the increased use of thermal receipts, this is becoming a very necessary step. As thermal receipts age, the print will disappear. I recommend that you scan each month’s worth of receipts at one time. Store your scanned documents on a trusted cloud account.
Upon researching what all I could write about, I found there is a bunch of stuff to do to prepare for the end of the year. You can find a really valuable site here with not only accounting information, but all around good, sound advice as to what should be done at the end of the year. In this blog, I will be concentrating on the financial/accounting end of what you should be doing to help reduce your liability.
The very first thing that should be done is making sure all your finances are pulled together and properly recorded. I recommend getting your financial statements done. If you not sure what all that involves or need help with it, talk to your accounting specialist. If you don’t have someone you can talk to, please send me an e-mail (linked in the second paragraph). You will want to make sure you have found all your receipts and have them accounted for properly. I highly recommend that you place all your receipts together in one place for easy access. I also would suggest that you take care of them on a weekly basis (or monthly if you can’t get to it weekly). What I am talking about here is a little different than the spreadsheet that I mentioned above. By using a spreadsheet, it can make the financial statements easier to prepare.
Next, you will want to make sure all your monthly, quarterly and annual payroll reports/obligations are completed. Whoever processes your payroll should be able to assist you with this.
Another recommendation is to defer your income until next year. My personal opinion, you will be counting that income at some point. Only you can determine when it is best to count it…the current year or next year.
To reduce your taxable income, you will want to make any purchases that you can justifiably make. Notice, I stated justifiably. Do not get yourself further into debt. If you happen to have “excess” profit and are wanting to lower your tax liability, then make those purchases you were putting off. The way that will benefit your taxes is called depreciation. More information on that can be found here.
Another very good thing to do is verify your inventory. You will need this information for your taxes, so might as well get it done.
One must also think of their future. And, if in the process of taking care of your future you can also reduce your tax liability, why not?!? If you can contribute to your retirement plan, now is a good time to get that done. You will want to talk to your financial advisor as to what will be the most beneficial and the deadlines involved.
In addition to what has already been mentioned, you can also make charitable contributions to help reduce your tax liability. One thing to consider, you don’t have to donate monetarily. You can also give items such as clothing, vehicles, or anything that can be useful to a charitable organization. You will need a receipt to prove that you donated, when you donated as well as its value.
There are lots of good spots to find this information mentioned in this blog. One site that I used is here. I found this article very informative.