Prepared by Lindsey Little, CPA – Manager
It’s that time of year again – the Thanksgiving grocery lists are getting written, children are starting their Santa wish-lists, and retail workers are decorating for multiple holidays at once. It is a joyous time of year and filled with a delightful hustle and bustle. But if a business owner is not careful, he or she may wake up to being 10 pounds heavier and with the new year already here. Before the new year and tax season arrives, there are some items to consider and act on to get your business ready.
- Consider your employees – having good and dependable employees are vital to keeping your business strong. If profits are good this year, consider giving them a bonus. A little extra cash running through the W-2 helps the employee and is also a tax deduction for the employer. It’s a win-win. If there is not spare cash to give, consider writing a thank-you note instead. The time and effort that goes into a thank-you note tells the employee that you care about them and what they contribute.
- Consider your community – your community has helped to keep your business running so consider what you can do to give back. Perhaps your business can donate cash or time. Your business could also be a sponsor for a non-profit event. It is a great way to support the community and advertise your business.
- Consider your business’s filing requirements – tax season is just around the corner and there are multiple requirements to consider. Here are just a few:
- Business Income Tax Return – with the passing of tax reform last December, there are many favorable provisions that apply to businesses. One of the main provisions is Section 199A that allows a deduction of up to 20% of Qualified Business Income profit. Although this is a deduction at an individual level, it is important to discuss with your tax advisor whether your business qualifies and what can be done at the business level to maximize the deduction. Make sure to contact your tax advisor before year-end to schedule a time to discuss the new provision and run a projection so you do not have surprises when it comes time to file the business return in March or the owners’ returns in April.
- Form 1099 – it’s hard to not have a 1099 filing requirement. Any payment or series of payments over $600 that your business makes to individuals, single-member LLCs, or partnerships for services or rent need to be reported on a 1099. With a January 31st due date, it is important to start collecting information now. If you have not already, send the vendors Form W-9 so that they can provide you with the official reporting information your accountant or you will need. You can access Form W-9 from www.irs.gov or you can contact your accountant, who will be more than happy to help you send this out before the end of the year.
- Tangible Personal Property Tax Return – With a due date in April, it could be easy to let this return slide and prepare it on what has been listed for years. But when was the last time you reviewed your business’s fixed asset listing and compared it to what is actually still in the building? Your business could potentially be overreporting what assets are owned, and therefore paying too much in property taxes. A simple review and clean-up could potentially save you and your business some cash.
- Consider your business’s next year – set aside time to look back at what has been accomplished by your business during the current year and look forward to what you would like to do next year. Come up with a few goals and set up guidelines and/or budgets to help meet those goals. Consider whether you need to purchase any equipment to help meet those goals and if it makes more sense to do so this year or next.
- Consider your friends – as a business-owner, you have most likely had to build your network and find trusted advisors. Reach out to those who have really impacted you and let them know the difference they have made in your life. If you have not made those connections, start with a few key roles such as accountants, lawyers, or bankers and begin to work to build relationships with people in these roles. Running a business is not easy, and it helps to have people who are in your corner willing to help you.
- Consider your future – retirement may be years away or it could be right around the corner. Either way, it is important to have a plan in place. If your business does not have a retirement plan set up, now is the time to look into options and set aside cash to contribute. Plans set up in the business also benefit employees. Any cash contributed on behalf of employees becomes an investment in that employee and a deduction for tax purposes.
- Consider your family’s future – the holidays often remind us of what is important –family. Your family may or may not be very involved in the business, but you should consider what would happen to your business and your family if you were no longer around. When was the last time you looked through the operating agreement? Does it spell out what to do in the event that you are no longer able to run the business? If you cannot easily answer these questions, it is time to pull out your operating agreement and a pad of paper. Jot dot some notes about what you see for your business’s future and your family’s. Then, give your accountant and your lawyer a call and set up a time to discuss your thoughts. You will be able to enjoy your time this holiday season knowing that you have taken a little time to plan for the future.