Year-end SMB Tax Planning Checklist: As 2022 draws to a close, it is time for SMB owners to start thinking about their tax planning checklist for the coming year. Planning ahead and taking proactive steps now will help reduce the burden of taxes and make filing easier come April.
We believe that successful tax planning happens when you are organized and prepared. You see, tax planning is not just about making sure you pay the least amount of taxes. It’s also about understanding your deductions and credits, taking advantage of tax savings opportunities, and planning for upcoming changes in the tax code. This ensures that you stay compliant while optimizing your tax situation.
To help SMB owners get started on the right foot, we have compiled a Year-end SMB Tax Planning Checklist. In this checklist, you’ll find actionable tips and advice to help you plan for the coming tax year. Here’s what you should be doing now to save time and money when it comes to taxes:
24 Items for Your Year-end Tax Planning Checklist
1. Don’t wait until the very last minute
Procrastinating on your taxes can lead to costly mistakes. Start early and review all the items on this checklist to ensure you don’t miss anything.
2. Assess your financial situation
Evaluate your financial status by taking inventory of your income, deductions, investments, and other expenses. Knowing the major components of your financial picture will help you plan accordingly. Look at:
- Balance sheet
- Income statement
- Cash flow statement
- Statement of retained earnings
- Tax return from the previous year
3. Organize your documents
Gather all of your tax documents and organize them in one place. Keep your receipts, invoices, bank statements, 1099s, and other documents handy so you can easily refer to them when it comes time to file your taxes.
4. Review Your Tax Records
Reviewing your tax records helps you identify potential deductions, credits, and other tax savings opportunities that you may have overlooked in the past. It also allows you to spot any mistakes or missed opportunities and take corrective action before preparing your taxes.
5. Review your deductions
Be sure to review all of your deductions and credits. This includes deductions for expenses such as office supplies, professional fees, travel, meals, etc., as well as credits like the Work Opportunity Tax Credit (WOTC) and Child Tax Credit. Other deductions you might miss include:
- Delivery, freight, and express costs
- Business taxes, licenses, and memberships
- Bad debts
- Charitable donations
- Business insurance premiums
- Motor vehicle expenses
- Legal and accounting fees
- Depreciation expenses (Capital Cost Allowance)
- Property leasing costs and taxes
- Office expenses, stationery, and supplies
6. Review your investments
Review your investment portfolio to ensure you take full advantage of the available tax benefits. This includes reviewing the types of investments you are making, such as stocks, bonds, mutual funds, and real estate.
7. Check your withholding
Ensure you withhold the correct amount of taxes from your employees’ paychecks. This will ensure that you don’t have any unexpected tax liabilities come April.
8. Maximize retirement contributions
Maximize your retirement plan contributions to take advantage of the tax benefits they provide. Consider setting up tax-advantaged plans such as a 401(k), an IRA, or a SEP-IRA to save on taxes. Increase your contributions periodically to maximize tax savings.
9. Reconcile loan balances to your balance sheet
Year-end SMB Tax Planning Checklist: Make sure that your loan balances match the amounts reported on your balance sheet and tax returns. This will help you avoid potential tax liabilities or penalties related to incorrect reporting of loan balances. Balance sheet reconciliation also helps you:
- Identify and address any discrepancies
- Ensure that all loans are properly accounted for
- Verify the terms of each loan
- Note any changes in loan terms or payment schedules
10. Evaluate your current tax strategy
Is your current tax strategy working for you? Do you need to make any adjustments in order to take advantage of tax savings opportunities? Evaluating your current strategy can help you identify any potential issues and make changes to ensure that you are optimizing your tax situation.
11. Review your client and vendor list
If you’ve added any new clients or vendors this year, make sure they are included in your tax filings. This will help you stay compliant and avoid any potential penalties.
12. Prepare for tax season
Make sure you are well prepared for the upcoming tax season by setting aside funds to cover any taxes due and filing your estimated taxes on time. This will help you avoid any potential penalties or interest charges.
13. Note changes in tax breaks
Keep an eye out for any new or expiring tax breaks that could affect your business. This will help you take advantage of any beneficial opportunities and minimize your tax burden.
14. Give more to save more
Consider making charitable donations to lower your taxable income and maximize your tax savings. Consider giving up to $16,000 tax-free gifts to family and friends. Setting up a 529 education savings plan for your child’s college education can also help reduce your taxes.
15. Separate Any Personal Expenses Paid From Business Accounts
Separating any personal expenses paid from business accounts will help you avoid potential issues with the IRS. Make sure to keep track of any personal expenses paid with business funds and deduct them separately on your tax return.
16. Accelerate income—or defer earnings
Timing is key when it comes to managing your taxes. Consider accelerating income by taking advantage of bonuses or other one-time payments or deferring income by postponing invoices or holding back on payments.
17. Pay close attention to filing deadlines
Make sure you are aware of the various filing deadlines and plan ahead, so you don’t miss any important dates. This includes both federal and state filing deadlines.
18. Make sure you’re up-to-date on current tax law
Tax laws are always changing, so it’s important to stay up-to-date on the latest regulations and requirements. Knowing which laws apply to your business can help you maximize your tax savings.
19. Don’t fall victim to short-sighted business tax planning
Short-term tax goals can lead to long-term problems. Before planning for taxes, make sure you understand the implications of your decisions on your overall business strategy.
20. Buy tax-exempt investments
Consider buying tax-exempt investments, such as municipal bonds and U.S. Treasury Bills, to reduce your taxable income. These investments provide tax savings in addition to the returns they generate.
21. Make necessary purchases
If you need to make any business purchases or investments, consider doing so before the end of the year. This will help you take advantage of any available tax deductions.
22. Evaluate your accounting process
Your accounting process should be efficient and up-to-date. Make sure you are using the right software, have accurate records, and are maintaining a good filing system. This will help you save time and money come tax season.
23. Review your business structure
Is your current business structure still optimal for your business goals? If not, consider restructuring to minimize taxes. This could involve changing from a sole proprietorship to an LLC or S-Corp, for example.
24. Hire a professional
If you’re feeling overwhelmed by the complexities of tax planning, consider hiring a qualified tax advisor to help you manage your taxes. They can provide invaluable insights and guidance to help you make the best decisions for your business.
Get a Strategy
Year-end tax planning can be daunting, but with the right strategy and preparation, you can minimize your tax burden and maximize your savings. By following this checklist, you can ensure that your small business is in the best position for tax season.
Year-end SMB Tax Planning Checklist: But remember, this is just a starting point. To truly maximize your tax savings and take advantage of all the available opportunities, consider hiring an experienced professional such as Phillips Business Group to help you craft a tailor-made plan.
Our team of experienced tax advisors can provide you with the best strategies to reduce your taxes and keep more money in your pocket. Contact us today for a free consultation and get the most out of your year-end tax planning. We’ll be here to help you make sense of it all!