End of the Year Tips for Business OwnersSmall Business
2017 is right around the corner, and to help you ensure no approaching deadlines pass you by, we have prepared a list of things you should be aware of as we close the year. Some deadlines will land you in hot water with the IRS if missed, others just close some tax planning doors.
You probably already know the benefits of saving for retirement, and setting up a 401(k) for your business is one of the best ways to maximize tax savings. But did you know that you have a limited amount of time to set it up? That’s right, if you are interested in setting up a 401(k) and you are a business owner with no employees (other than a spouse), you have until December 31st to setup a solo 401(k) and have it effective for 2016. If you have employees, other than a spouse, you will have to wait until next year to setup a traditional, “Safe-Harbor” 401(k). The deadline to setup a traditional 401(k) is October 1st.
If the costs of running a 401(k) doesn’t sound appealing, you can still contribute to a SEP IRA. While the tax savings aren’t as great as a 401(k), the SEP IRA will still allow you to take a tax deduction by just transferring money from one account to another with your name. Not many deductions can do that! The deadline to fund your SEP IRA is whenever you file your individual tax return. Even if you extend your tax return, the deadline is when you actually file the return, so if you extend your tax return for 2016, you could create and fund your SEP IRA in October 2017 (before you file your 2016 personal return), and then take that deduction on your 2016 tax return. Of course, we wouldn’t recommend waiting until the last minute to create or fund your retirement account, but with the SEP you are afforded some flexibility.
Tracking Contractor Payments
Have you been caught running around with your hair on fire come “1099 season”? Going through your bookkeeping, looking for any individual you paid over $600, so you can send them a 1099 by January 31st. We have witnessed that many times. That’s why we recommend going through your bookkeeping now, looking for anyone you paid over $600 (or think you will pay over $600 in the year), and gather the required information now, as opposed to January when the deadline is looming. Have each of your contractors fill out form W9. This gathers all required information that you will put on their 1099. There are plenty of companies out there who will file the 1099s for you; we use a company called Yearli. Here is a link to their website if you are interested in getting 1099s off your plate next year: http://yearli.greatland.com/.
Review Your Business Sales & Expenses for the Year
Take a few minutes to review your sales. Were they what you expected them to be at the beginning of the year? Did some products or services sell better than you expected? Did some not sell as well? Were your sales seasonal or peak at a particular point of the year? If there were surprises in your sales then this might be an indication that your business is shifting, and staying ahead of the shift can be a great opportunity for your business.
Likewise, how did your expenses compare against what you expected? If your expenses tracked closely against what you expected then it means that your business is predictable, and that’s a good thing for a business owner. If your expenses weren’t what you expected, then maybe that’s a good indicator that you should sit with your bookkeeper and find out what happened during the tax year because unpredictability in business can be a dangerous thing.
While you are reviewing the business’ income and expenses, make sure nothing is missing, and everything is presented correctly on the income statement and balance sheet. Tax season will be a breeze with accurate financial statements.
Set Goals for 2017
“The greater danger for most of us isn’t that our aim is too high and miss it, but that it is too low and we reach it.” ~ Michelangelo
While this isn’t a deadline, it is still extremely important to set goals for next year. First, consider what you want to achieve, then commit to it. Set specific, attainable, and relevant goals that motivate you and write them down to make them feel tangible. Then plan the steps you must take to realize your goal, and cross off each one as you work through them.
With these tips in mind, you will be off to a great start when the new year arrives!