Year end Tax Tid Bits for your business
With the end of the year right around the corner, it’s time we start planning for the upcoming tax season. So the next few articles will contain some bits of useful information to help prepare you and your business for a successful filing. Although the tax code can be torturous to understand, I’ve pulled out some of the most common ideas that the average small business will come across.
1) Owner participation: It pays to participate in your business to the fullest extent possible in order to deduct all your losses under the passive loss limitation rule. This rule only pertains to those business owners who have ownership interest but do not work in the day-to-day operations or management. If you qualify for this rule, be sure to keep good records of how and when you participated in the business.
2) Review qualified plan selection: Review your plan (SEP, IRA, SIMPLE )to make sure it optimizes your benefits while keeping your costs down.
3) Reimbursement arrangements: When reimbursing for travel or entertainment, be sure that the arrangement is treated as an accountable plan. The company deducts the expense and no income is reported to the employee.
4) Classify workers correctly: Make sure you are classifying workers as employees instead of Independent contractors. If you misclassified, the IRS will charge back employment taxes with interest and penalties.
5) Accelerate expenses: Pay outstanding bills in advance. Make purchases for needed equipment and supplies. Be careful not to prepay expenses that relate to items extending beyond one year.
Jacqueline Ford
Financial Strategist
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