5 Year-End Tax Saving Tricks for Small Business Owners

It’s not too late to reduce the income tax hit you’ll take next April. Act now, and you’ll have one more reason to pop the cork and look forward to a happy New Year.

1. Accelerate Business Expenses

If you’re considering a major investment in equipment or other capital expenditures, do it before December 31. Then you can claim the deduction in your 2018 taxes next April.

Another thing you can do is move forward some normal expenses from the months ahead. For example, you could purchase 3 months of supplies rather than your usual 1-month stock. As long as you mail the check before December 31, you can deduct the entire amount from your 2018 tax.

Likewise, you can charge recurring expenses that come due in early to mid-January, such as rent, to your credit card. Even though the credit card bill won’t be paid until January, it counts as a current year deduction.

2. Accelerate Depreciation

You have two options for claiming depreciation on new and used business assets: taking the full amount in one year or depreciating them over time. Taking the instant depreciation can give you a huge write-off now, but may not be best in the long run. Discuss with your tax advisor which strategy is right for you.

3. Defer Income

Generally speaking, you don’t have to report income until the year you actually receive the payment for your products or services. Send out December invoices late in the month, so you won’t collect the money for them until January.

4. Make an IRA Contribution

The money you pay into a traditional individual retirement account (IRA) is tax-deductible in the year you make the contribution. (Actually, you have until April 15, 2019, to make your 2018 contribution.) As an added bonus, any interest or other earnings the IRA accumulates over its life are not taxed until you retire and begin withdrawing the money.

Note: The rules are different for a Roth IRA. This type of IRA requires you to pay tax on contributions in the year they’re made, but withdrawals after retirement are tax-free.

5. Take Capital Losses

If you sell stock or other assets at a loss (meaning the sale price is lower than what you paid for it), you can write off the amount of the loss up to $3,000. If you made capital gains on other stock, you can use the loss to offset the gains and avoid paying capital gains tax.

Be aware, however, that you can’t turn around and buy the same or similar stock right back after using it to claim a loss deduction. If this happens within 30 days, it’s called a “wash sale” and the IRS will disallow your tax loss.

Some of these tips involve deferring tax liability to next year, rather than completely eliminating it. Whether that’s the smart thing to do depends on what you expect your income to be next year, what the tax rates will be, and other factors. Xendoo tax consultants can help you understand the options and steer a path toward maximum tax benefits for your business.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

The Small Business Year-End Checklist

Just like spring cleaning your house, your business needs a good tidying and updating once a year. Make December the month you get organized, focused, ready, and able to create more success than ever in 2019.

 Catch up on your bookkeeping.

Until you have a clear picture of your annual profits and losses, you won’t be able to make decisions for the future. Ideally, you have tracking software that’s been keeping you up to date on expenses and income. Now it’s time to analyze the numbers and see where there’s room for improvement.

 Plan for taxes.

If you pay quarterly estimated income tax, double-check that all payments have been made, to avoid incurring penalties. Make tax-reducing moves such as capital expenditures and donations. Your accountant can give you other tax-saving ideas and help you decide on the best ones for you based on your business profits or losses, projected tax rates, and other factors.

 Organize receipts.

Prevent a big headache at tax time and get that pile of paper receipts digitized. Scan them and group them in folders according to vendor and tax year. If the payments aren’t already in your bookkeeping system, enter them now.

 Archive old files.

Clutter is one of the biggest hindrances to productivity. Move anything that’s not current from your computer, desk and filing cabinet, into separate long-term storage. For digital files, it’s easy to put them on their own hard drive.

 Back up all digital data.

You don’t want one server crash or natural disaster to wipe out all your records. Back up your files in at least 2 places, including external hard drives and cloud-based services.

 Analyze your suppliers.

What products and services worked well for you this past year? You’ll want to keep on doing business with them in 2019. What isn’t giving you a good return on your investment? If advertising flyers cost more to print and mail than they’re bringing in new business, consider a better use for your marketing dollar.

 Analyze your productivity.

Make a list of your work-related activities, and how much time you spend on each of them. Now decide which ones are helping you meet your goals, and which are distracting you or no longer relevant. Would be better to delegate.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Bookkeeping New Year’s Resolutions for a Smarter SMB

Are you hoping to be more profitable and efficient in 2019? Good bookkeeping habits can go a long way toward helping you achieve your goals.

I will not mix business and personal bank accounts.

It’s all too easy to pull out the business credit card for personal expenses, or vice versa. However, this creates an accounting nightmare in which profits and losses can’t be tracked, and filing your tax return is way too complicated. The long-term hassles far outweigh the short-term convenience. If you need to take money out of the business, do it as a bank transfer of salary.

I will update the financial information every week.

Keep the bookkeeping tasks small and manageable by doing them at frequent intervals. Waiting until the end of the month puts you under a big burden of playing catch-up, especially when it’s harder to remember what happened 3 weeks ago than 3 days ago.  That’s why Xendoo provides weekly bookkeeping, to keep you ahead, all month.

I will make a budget.

With complete, up-to-date financial information in hand, you can create a budget based on actual data, rather than guesstimating.

I will compare the budget to actual every month.

No matter how accurate your budget was when you made it, conditions are constantly changing. See how your business is doing by comparing actual income and expenses against what the budget projected them to be regularly. This puts you in a position to make adjustments and nips any problems in the bud.

I will find a financial system that works for my business.

Your system should make your work life easier, not harder. It should integrate easily with your business management system, eliminate duplication of effort, prevent errors, automate routine tasks, and be available when and where you need it, to mention just a few of the criteria most small business owners want.

Xendoo’s bookkeeping teams and cloud-based software provides small business owners with digital reconciliation of bank transactions, online invoices, monthly P&L statements,  24/7/365 access to your financials on your smartphone, and much more. It sets you free to do what you love: keep your business growing in 2019 and beyond.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Best Books for Your Favorite Small Business Owner

You probably know someone who works very hard to make a success of their small business (or maybe that someone is you). This gift-giving season, help them work smarter with these 10 great reads. Written by world-renowned experts, they offer wisdom and actionable tips that have helped millions of business people achieve their dreams.

The 7 Habits of Highly Effective People

by Stephen R. Covey

Success starts from within, says Covey, and the right attitudes make all the difference in dealing with work, life, change, and challenges. Now available in a 25th-anniversary edition, this best-selling classic has led everyone from CEOs to teachers to be more successful in their personal and professional lives.

Getting Things Done: The Art of Stress-Free Productivity

by David Allen

Nobody has more need of this book than the small business owner who probably does the work of at least 5 people every day. First written 15 years ago and now completely updated for the current and future workplace, it offers a comprehensive approach to efficiently organizing tasks.

How to Win Friends & Influence People

by Dale Carnegie

First published in 1936, this is the all-time best-selling book on building and improving relationships. The small business owner can profit greatly from these tried-and-true steps to make people like you, win them to your way of thinking, and change them without causing resentment.

Good to Great: Why Some Companies Make the Leap & Others Don’t

by Jim Collins

Some businesses are successful because they do everything right from day one. But what about the companies who make mistakes, are mediocre or even positively bad, and then go on to turn it around? Jim Collins researched 28 such companies and shares insights on their successful management strategies and practices.

The Tipping Point

by Malcolm Gladwell

When — and why — does an idea, trend, or product become a phenomenon? The Tipping Point examines that magic moment, and how businesses can use social science to empower their sales and marketing.

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It

by Michael Gerber

Small business owners can be held back from success by their expectations, assumptions, and even technical expertise. Michael Gerber dispels the myths and provides an experienced guide through every stage in the life of a business, from start-up to growing pains to maturity.

Raving Fans: A Revolutionary Approach To Customer Service

by Ken Blanchard & Sheldon Bowles

In the era of social media and online reviews, customer service is more important than ever. This book provides instantly actionable tips and techniques for turning customers who are merely satisfied with raving fans who will boost your bottom line and help promote your business.

Zero to One: Notes on Startups

by Peter Thiel & Blake Masters

Starting a business doing what others already know how to do takes you from one to whatever. This book covers what to do when you’re looking for or have invented a completely new idea — starting with learning to think for yourself.

Grit: The Power of Passion and Perseverance

by Angela Duckworth

Often, the secret to success is not exceptional talent, intelligence, or expertise, but simply not giving up. In this New York Times best-seller and Forbes must-read business book of the year, psychologist Angela Duckworth shares inspiring stories of those who were repeatedly knocked down, and always got back up.

Drive: The Surprising Truth About What Motivates Us

by Daniel H. Pink

What causes people to strive for success? If you answered, the desire for money, fame, or power, you’re wrong. What really motivates high performance is personal satisfaction: the ability to direct their own lives, the opportunity to learn and create, and the sense of purpose to improve their family and the world. Business owners and their employees alike will reap the rewards of fulfilling these needs.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.