Top 5 YEAR END TAX PLANNING TIPS for Business Owners

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This video is intended for education purposes and should not be taken as legal, financial or tax advice.  You should consult with a professional about your unique situation before acting on anything discussed in these videos.  Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. are providing educational content to help small business owners and individuals become more aware of certain issues and topics, but it cannot give blanket advice to a broad audience.  Neither Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. nor its members can be held liable for any use or misuse of this content.

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TRANSCRIPTION:

Hello small business owners, it’s almost the end of the year and it’s time for some smart tax planning before the year ends so you pay less taxes next year. So these are the top five tax planning tips for the end of the year so you finish your year strong. Let’s go! End of the year tax planning tip number one is bringing your accounting up to date.

Give your books are not up to date. You are limiting your tax strategist to look for every possible tax planning strategy that can be implemented in your business. Why? Because smart tax planning requires accurate numbers.

If you don’t have your books up to date, tax planning becomes a guessing game. So you want to make sure that you bring your accounting up to date especially your tax strategist must know more or less your projected net profit before the year ends to see every single tax strategy that can be implemented for your business so you pay less taxes. So tip number one bring your accounting up to date.

End of the year tax tip number two is optimizing your business tax structure. Many small business owners don’t know that there are many different tax structures available for your business and depending on your goals, depending on what your business does, depending on the amount of income and net profit that your business is generating, you as a business owner can elect what tax structure is most beneficial for your business. For example, let’s say that you have an LLC and when you project the end of the year net profit if your LLC is projecting that it’s going to finish with a net profit of at least $40,000 then you may consider changing your LLC tax structure over to an S corporation that will allow you as a business owner to save the 15.3% nasty FICA tax.

So tip number two is making sure that your business has the correct tax structure. End of the year tax tip number three consists of two parts. Number one deferring income till next year and number two accelerating expenses for this year.

How does that work? So one way to reduce your tax liability is to reduce your taxable income. So let’s say the end of the year is coming and you can defer part of your income for next year. For example, I remember that I had a client a couple of years back calling me the second week of December.

My client told me, Carlos, I’m getting a $4,000,000 commission in the next two weeks. What can I do to pay less taxes? I’m like, well, we’re kind of limited because we only have two to the end of the year. So we’re very limited on the things we can do.

So I told my client, ask your client that instead of giving you the $4,000,000 commission now in December, if he can pay you the $4,000,000 commission in January, that way we basically push that income for next year. And that way we had a full year to tax plan for our client, saving him thousands of dollars in taxes. So if you can push your income for next year, that’ll lower your taxable income.

And part number two, let’s accelerate expenses. For example, if you’re planning on buying equipment, software, if you’re planning on doing marketing and you can pay your vendors before the year ends in advance, that will lower your taxable income and lower your tax liability. So tip number three, defer income, accelerate expenses.

End of the year tax tip number four for small businesses is taking advantage of section 179 and bonus depreciation. And the last tip, we were talking about accelerating expenses before the year ends. So there are some expenses or some things that you can buy for your business that you can’t expense it in full in one year.

For example, usually when you buy business vehicles, large business equipment, you can’t take the full deduction the year you bought the equipment because you have to divide that cost in the lifespan of that equipment. But there are some types of equipment and there are some vehicles that qualify for section 179 and bonus depreciation that allow you to expense that business vehicle or software or business equipment in full the tax year that you bought the equipment. Thus, you can deduct the full amount of the expense of the vehicle or equipment, lowering your taxable business income.

And finally, tax tip number five for the end of the year is maximizing your retirement account contributions. You as a small business owner have the capacity and there are many different retirement account options for you that have tax advantages. SEP IRAs, solo 401ks, regular 401ks, IULs.

There’s many different retirement account vehicles and all of them have advantages and disadvantages. So you can call our Freedom Insurance Financial Division here at Freedom Group. They may help you find the best retirement account for you that have tax advantages.

So there you have it. Tax tip number five to the end of the year is making sure you’re contributing the max amount to your retirement accounts that can allow you to have tax benefits now and build your nest egg for the future. And there you have it.

Those are the top five end of the year tax tips for small business owners. You can end the year on a high note and put more money in your pocket. Now, if you have received valuable information in this video, remember to like it, subscribe, share it with another business owner that can take advantage of this information.

Remember that here at Freedom Tax Accounting, we don’t just do taxes, we also do tax planning. And also here at Freedom Group, we can help you with immigration, real estate, insurance, financial planning, accounting, bookkeeping, opening up new LLCs. So we can help you in many, many ways.

Thank you for watching this video and God bless you. Bye-bye.