Dec 1, 2021
By Eva Reinoso Tejada :::
This is the time of the year when small businesses, and all businesses for that matter, look into their numbers and prepare for the tax season. Reviewing your sales, your expenses, and your budget for next year will help guide your decisions and evaluate the direction your business is going. It will also help you reduce your tax bill if you plan accordingly.
Simple action items that you can execute before the year ends, can help you reduce your tax bill. These are some of the most popular ones:
1. Defer income: If you have the option to shift income to the 1st of the year, assuming that you are a cash-basis taxpayer, will save some money on your current year tax bill. Ask your accountant if this is a good option based on the nature of your business.
2. Inventory check: If the market value of your inventory has dropped due to obsolescence or any other reason, you might be able to claim additional deductions, depending on which accounting method you are using.
3. Start a retirement plan: If you are self-employed or a small business owner, there is a variety of options to save money for retirement that will also provide you with a tax deduction for the year in which you make your contribution. Some examples of these are SEP IRAs and Traditional IRAs. These usually have a maximum contribution you can take every year. It is recommendable to maximize your allowed deduction every year.
4. Make purchases: This is a good time to spend money on items that might be deductible as business expenses. Equipment upgrades, office supplies, uniforms, they might be deductible in the year you pay for them, even if their life extends into future years. Your accountant will know how to handle this.
When you are purchasing items that you will use for your business, to take a tax deduction, these items must be both ordinary and necessary, says the IRS. According to bench.co, an accounting software provider, the most commonly available deductions might include: advertising and promotions, business meals (with conditions), business insurance, business interest and bank fees, business use of your car, contract labor, depreciation of your assets, education, home office, legal and professional fees, moving expenses, rent expenses, employee salaries and benefits, telephone and internet expenses, and travel expenses, among others.
Items that are imprinted or decorated with your company logo will account for a deductible expense. A printed t-shirt or an embroidered hat, a sticker with your logo to be placed on your vehicle, a printed mug with a message for your customers, banners and flags for the outside of your business, these are all examples of promotional and advertising items that will do the trick. Image Impressions is here to provide you with any printed or decorated item that you need, and we are open during the month of December to help you get that tax deduction in! Call us at 303-308-9444 and let us know how we can help your business.