As 2024 draws to a close, businesses in all industries are navigating the vibrant hustle and bustle of the holiday shopping season. Owners and their employees are working hard to meet the surge in demand, ensuring their shelves are stocked so shoppers can find what they need during this busy time of year. In addition to the potential for increased sales, the year's final weeks present an opportunity to lay the groundwork for financial success through effective tax planning.
Yes, the holiday season is a busy time of year, but preparing your business taxes sooner rather than later can reveal opportunities to reduce taxable income, identify potential tax deductions, and be compliant with the Internal Revenue Service (IRS). Moreover, early tax preparation can save time when filing your return. This Huddle Business Capital blog article examines end-of-year tax tips for businesses.
Review and update your financial statements and records.
Maintaining business records helps provide a clear snapshot of your company's financial health. Moreover, keeping your tax records current will help streamline the filing process and may maximize your refund or minimize your tax liabilities. So, take the time to review and update your tax records carefully.
You will need receipts for deductible expenses (e.g., rent, professional fees, advertising, travel expenses, etc.) and all necessary documents, such as W-2 Forms and 1099 Forms. If you cannot locate any receipts or documents, contact the relevant parties—such as vendors, service providers, or colleagues—to request copies.
Finalize tax responsibilities for remote employees and contractors.
If your company employs remote workers, you must take the necessary steps to be compliant. This can be complicated if you have employees who live and work in a different state, as each state has its income tax laws and regulations. You will be required to determine your remote workers' state income tax obligations, document any relevant deductions or credits, and verify that payroll taxes are being withheld according to each remote employee's location.
If your company hired independent contractors this year, you must complete and submit a 1099 Form for each contractor who earned $600 or more.
Invest in business equipment before the year ends.
Getting new or upgraded equipment, vehicles, or technology during the busy holiday season might seem daunting and time-intensive. However, there are fast funding options that make it possible even with minimal time left in the year. These include equipment financing and equipment leasing, both of which offer an easy application process and quick turnaround times.
Huddle Business Capital, for example, offers same-day funding of up to $300,000 from our network of top-tier lenders to finance or lease equipment. Investing in qualifying business equipment before midnight, December 31, 2024, allows you to take advantage of the Section 179 tax deduction.
Give back to the community to increase your deductions.
Becoming involved in your local community enriches the lives of others. Plus, it can benefit your company's financial situation during tax season. You can increase your tax deductions by donating money, goods, or gifts to local charitable organizations, schools, or churches. Keep written documentation of each community organization or cause your company donates to, along with their tax ID.
Many charitable organizations want to fulfill their missions during the holidays, providing an excellent chance for your business to make a positive impact.
Consult a certified public accountant.
As the New Year approaches, you may find yourself rushing to organize your business's financial matters. With all the year-end tasks, getting assistance from a certified public accountant (CPA) can be highly beneficial. By discussing your company's financial situation now, a CPA can help you implement strategies that could reduce your taxable income or defer certain liabilities into future years—strategies that may not be available if you wait until filing season.
Plus, a CPA can streamline the year-end process and provide expert insights, ensuring your company's financial records are up-to-date and accurate. With their attention to detail, CPAs ensure accuracy in your tax return, giving peace of mind by reducing the risk of mistakes or errors.
Defer business income until the new year.
If your business uses the cash method of accounting for income tax purposes, you may be able to defer a certain amount of income until the start of the new year. You can do this by invoicing clients or customers or finalizing business contracts at the beginning of January to recognize the income in the New Year. Doing so offers an opportunity to lower your tax liability for the current year and maximize your deductions.
The IRS has rules and guidelines for deferring business income, so it's important to consult with a CPA to ensure compliance with the IRS and to determine the best approach for your specific circumstances.
Disclaimer.
Huddle Business Capital is not affiliated with nor endorses the Internal Revenue Service (IRS). This Huddle Business Capital blog article is purely educational and contains general information and opinions; it is not intended to provide advice or recommendations of any kind.
