Imagine if tax preparation was stress-free. The tax season is often stressful for many families, especially if you aren’t familiar with accounting strategies that may lessen what you owe.
Some people only pay personal taxes, but business owners must also bear another set of taxes. Organizing small business finances for tax preparation adds extra work, and you want to take extra care to avoid simple but impactful mistakes.
The best way to get ahead on your tax requirements and end-of-year goals is to prepare early. These are our year-end accounting strategies for small business owners to streamline their tax preparation and financial goals:
What Is Year-End Accounting
Year-end accounting is the closure of the year for small business finances. This accounting method includes every transaction throughout the year. An accountant then balances the books.
This accounting practice helps small business owners ensure accuracy when preparing taxes. It also allows small business owners to detect mistakes within their accounting.
Not all year-end accounting timelines take place from January 1st to December 31st. Any 365-day timeframe will suffice.
Begin the year-end accounting process by including paid invoices. You must include all business income in your year-end accounting.
If a customer has not paid an invoice, start sending reminders. Not only will you get paid, but you can put these invoices in the books. Quickly create and provide invoices to new customers, so they pay soon.
You can write off unpaid invoices as bad debt. This approach will only work if you made a genuine effort to collect payments. You’re better off receiving the invoice payment, so only use the bad debt label as the last resort.
Catch Up on Your Expenses
Record every possible expense into your accounting software. Racking up costs will lower your taxes and help with balancing the books.
Searching for every individual expense item at the end of the year is stressful. If you spread the work across each month, you will more easily stay on top of expenses.
Pay Quarterly Small Business Taxes
Not every business owner adequately prepares for the year-end tax bill. Small business taxes represent a sudden jump in costs for many businesses.
To reduce the impact of year-end small business taxes, you can pay quarterly taxes. Quarterly taxes split your year-end tax payment into four different amounts. It’s essentially a payment plan for managing your taxes.
Here are the deadlines for quarterly tax payments:
- April 15th
- June 15th
- September 15th
- January 15th
Missing a quarterly deadline won’t devastate your taxes. Quarterly payments help cushion the blow of tax season.
Sell Unprofitable Investments
Selling an unprofitable investment lets you offset any gains. It’s a common practice to sell underperforming stocks at the end of the year for tax benefits.
If you want to re-invest in those companies, wait at least 30 days. Investing in the company over a month later evades the wash sale tax rule.
You can invest in a similar asset to achieve similar returns. In the meantime, you’ll score a nice tax deduction.
Ready to Pay Your Taxes?
None of us can avoid death or taxes. However, the tax season does not have to be stressful. Small business accounting services ease the process and unveil various tax deductions. Contact us today to see how we can help.