Your Year-End Business Plan

If you own a small business, reducing your 2021 tax bill and planning for a successful new year should be on your radar as the current year draws to a close.

Check Your Records

Start by making sure your books are accurate and up to date. Consult your tax professional to resolve any questions you have before tax season arrives so you’re not left trying to sort things out at the last minute. Reviewing both your income statement to get a handle on profits and losses and your cash flow statement to see how money was spent can help you plan for next year.

Defer Income

One way to lower this year’s tax bill is by deferring income to the beginning of 2022. This tactic makes sense, especially if you expect your income to be less next year.

Increase Deductions

Purchasing supplies in advance and upgrading equipment before the end of the year may help you maximize deductions on your 2021 return, assuming you pay for them before year’s end.

Contribute to a Retirement Plan

You can reduce your 2021 income by making contributions to your retirement plan. Contribution limits vary, depending on the type of plan. Your financial professional can let you know how much you can contribute.

Consider Your Workspace

If you’re self-employed or you work from home and have a dedicated room or space for conducting business, you may be eligible to take the home office deduction. Rules for claiming the deduction are specific, so consult your tax advisor.

Deduct Bad Debt

On occasion, your business may have customers who have not paid you for goods or services within a reasonable period. If you have unpaid invoices and no reasonable expectation of payment, you may be able to deduct the debt on your tax return.

Revisit Your Goals

Year’s end is an appropriate time to look at the goals you set for the year and assess whether you achieved them. If your goals fell short of your expectations, determine the reasons. Then think about the steps you can take in the new year to position your company to thrive.