5 Tax Decisions Business Owners Need To Make Before Year End

kelowna accountantA common question I get as the end of the year approaches is what should I be doing to get my business ready for year-end? It’s good to be thinking about how to best position your finances and planning ahead on any significant events that will affect how much tax you will be paying in June.

I’ve outlined 5 important year end tax planning decisions that you need to make within your business before we finish this lap around the sun.

1. Maximize Expenditures In The Current Year

It really does make the most sense to buy any equipment or large expenditures that you might be looking at purchasing before year-end, as opposed to waiting until the first week of January. Sometimes you can work out some good vendor terms and still get your deduction within the current year.

If you’re wondering whether you should do it now or wait until the New Year when cash is more free flowing, my answer is to definitely buy it now.

2. Are You Giving Bonuses To Employees?

Figure out if there is any ability to give employee or management bonuses, as this is something you can accrue at or prior to year-end without having to pay until 180 days after year-end. This is why any decision around employee and management bonuses should be made prior to year-end and recorded since you can accrue them on the books of the company and not necessarily have to write the checks right away.

3. Order Before Year-End, Have It Shipped Afterwards

If you’re a client or business that carries inventory then it is probably easier for you to have your inventory restocked after year-end. Get the order in before year-end so you can get the deduction but have it delivered afterwards, just for ease of count and simplicity’s sake.

4. Review Major Asset Sales With Your Advisor

If you’re selling a big asset then there is generally some planning your accountant can help to do around it, especially if you have more than one company. Generally there is some good planning required around large transactions so it’s a wise plan to call your accountant if anything outside of the normal day to day operations is happening. It’s always easier to get advice beforehand rather than going ahead with it and trying to fix it later.

5. Review Any Major Purchases With Your Accountant

Similar to selling, your accountant can help you do a lot of planning to make sure things go smoothly for you when doing any major purchases, whether it is equipment or an acquisition. We do a lot of work with our clients and helping them go to the bank to negotiate better terms that make sense for them and not just the bank.

Don’t be afraid to ask for help with financing because accountants not only tend to have a lot of experience and relationships with many lenders but they are usually pretty good at helping you negotiate better financing terms.

Don’t Wait Until The Last Minute

Make sure that you are taking the time to reach out to your accountant before year-end to get any necessary guidance you may need to bring this year in for a smooth landing. Don’t leave yourself stuck at tax time with no recourse because of poor planning or you will be stuck paying for it in the end.

Based on experience, what is some year end tax planning advice you would share with other businesses? Leave your answer in the comments below!
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