Year-end provides tax planning opportunities for not just individuals, but businesses, too! We’ll look at a recent Forbes.com article highlighting four tax saving tips for small business owners.
Tip 1: Opt to pay annually, not monthly. Sometimes, paying the whole thing up front can lead to discounts. Take a look at any products or services you’re paying monthly, determine how valuable they’ve been for your business and see if you can pre-pay for the helpful ones. Not only can this lead to a discount, but spending on business products and services is tax deductible, too.
Tip 2: Market your business. Have marketing strategies or tools that are working for your business? Advertising and marketing spending is another tax deductible expense, so review the successful tools and strategies from this year and plan to invest in them again in 2017. Again, pre-paying for all or even part of the year could get you a discount, so it’s worth looking into your options.
Tip 3: Invest in qualified retirement plans. If it’s been a particularly profitable year, take some of that gross profit to set up retirement plans for yourself and your employees. If it’s just you or you only have a few employees, a Simplified Employee Pension (SEP) Plan could be for you.
The benefit of an SEP plan is that it’s easy to set up or to cancel if your company grows to a size where it’s no longer the best option. However, an SEP plan requires employers to contribute the same percentage of employee salary to each employee and contribute 100% of the funds.
If an SEP plan isn’t your company’s best option, you can also set up a 401(k) plan for your employees. While 401(k) plans are often a more expensive option, employer contributions are entirely optional and costs associated with the initial set up are tax deductible. Both the SEP or 401(k) plans can help lower your adjusted income, minimizing your expected tax burden.
Tip 4: Take advantage of charitable giving. It’s not only individuals who use year-end charitable giving to minimize tax burdens! And it’s not just a tax benefit; charitable giving is a good look on companies. Studies show consumers are more likely to support businesses that are actively contributing to the community.
Don’t forget to check that your donation is tax deductible! Donated time won’t be tax deductible and in some cases, donations to certain tax exempt organizations are unable to get you a deduction. Do your research ahead of time to be certain and once you’ve selected a charitable organization, make sure you get a receipt with the organization’s name, the donation amount and date for tax reporting.
These are just a few of the year-end opportunities for small business owners. Speak with your accountant or other tax professional to ensure you don’t miss out on any opportunity.
If you’d like to learn how to include your business in your estate planning, explore our website and contact us to schedule your consultation today!
Reference: Forbes.com (December 12, 2016) “Four Year-End Tax Saving and Smart Planning Tips for Small Business Owners”