5 Year-End Tax-Planning Moves for Business Owners
5 Year-End Tax-Planning Moves for Business Owners for business owners like me, who are scrambling to wrap up activities while planning ahead for the new year. This December is particularly challenging because of continuing tax uncertainty. As a small-business owner and tax expert, I’ve decided to focus on what is known rather than on what is not known about tax rules, and to take 5 Year-End Tax-Planning Moves for Business Owners year-end actions that are helpful regardless of possible changes to tax rules.
Here are 5 Year-End Tax-Planning Moves for Business Owners at year end:
1. Bring your books up-to-date. Before any tax planning can be done, it’s vital to know whether your company made or lost money for the year. To do this, accounting records must be up-to-date. Some business owners I know let this task slide for months and, unfortunately, may not be prepared to think about year-end tax planning at this time.
2. Consider a retirement plan. Profits can be sheltered in qualified retirement plans, and the 2010 rules remain relatively unchanged from 2009. For example, a corporate owner or self-employed person whose salary or net earnings are sufficient can contribute a maximum of $49,000 to a SEP (Simplified Employee Pension) plan, scoring a tax deduction while saving for one’s golden years. Owners who don’t yet have qualified retirement plans for their companies need to complete the paperwork (provided by their financial institution or mutual fund) by Dec. 31. Then they’ll have until the extended due date of their 2010 return to make their contributions for the year.
It’s wise to discuss the wide range of plan options with a CPA or other financial adviser. Keep in mind, if you do miss the Dec. 31 for setting up a qualified retirement plan, you still have one plan option – the SEP – which can be set and funded as late as the extended due date of the return.
3. Don’t forget health coverage. Owners (other than those with a C corporation) who pay for their health coverage can deduct it, but only as a personal expense rather than as a business expense. However, for 2010, if you are self-employed you can use the premiums to offset the amount of net earnings used to calculate self-employment taxes (which cover mandatory Social Security and Medicare contributions). Because of the tax savings, owners may want to reduce their estimated taxes. The last payment for 2010 is due on Jan. 18, 2011.
Those who use the cash-basis accounting method might also want to pre-pay their 2011 premiums to boost their write-off for 2010 while saving on self-employment taxes.
If the insurance qualifies as a high-deductible health plan, then you’re allowed a tax-deductible contribution to a Health Savings Account, or HSA, for 2010. (To be considered “high deductible” in 2010, the policy’s deductible must be at least $1,200 for individuals and $2,400 for families and meet certain other tests.) While the HSA 2010 contribution can be made as late as April 18, 2011, the sooner it is made, the more earnings you can build up on a tax-advantageous basis. Earnings will never be taxed if withdrawn to pay qualified medical costs.
4. Donate to charity. Business owners who have had a good year can share their good fortune with charities. The donations are tax-deductible within the limits allowed by law. For example, if you own a C corp, your charitable deductions are limited to 10% of taxable income.
For owners who record business income on personal tax returns (such as sole proprietors, or owners of S corporations or limited liability companies), it’s helpful to note a change for 2010: There’s no phase-out of itemized deductions for high-income taxpayers. That’s a shift from prior years, when contributors lost part of their charitable deductions when income exceeded a threshold amount. If you’re unsure whether an organization qualifies for tax-deductible contributions, check IRS Publication 78.
5. Upgrade equipment. If you need to invest in new business equipment or upgrade old machines, now is a great time to act. I’m buying a new smart phone and other business owners I know have made similar buying plans. Whether the business is profitable or not, there is a tax break to help.
-If the business is profitable, elect first-year expensing for the cost of equipment up to $500,000. (This dollar limit is up from $250,000 in 2009). If the cost is more than the dollar limit, you can also use 50% bonus depreciation and a regular depreciation allowance to effectively write off most of the cost of the purchase. The bonus depreciation option is set to expire on Dec. 31.
-If the business is not profitable, rely on 50% bonus depreciation to write off half the cost (plus a regular depreciation allowance on the other half). This write-off can create or increase a net operating loss, which can result in a carryback that can generate a cash refund.
While first-year expensing can be used for new or pre-owned equipment, bonus depreciation is limited to new equipment. However, the purchase of equipment for both first-year expensing and bonus depreciation can be financed in whole or in part without any impact on the tax write-off.
A final word: I’m waiting to see what Congress does with taxes-the extension to 2010 of provisions that expired in 2009, as well as the possible extension for 2011 of Bush-era tax cuts-before making any dramatic tax moves, such as deferring income and accelerating deductions. Hopefully there will still be enough time to act.
Tax-Planning Moves for Business
Contador público en Miami demuestra su guía lo ayudará a planearlo todo, preparándolo para el éxito. Guía de Planificación Financiera de Pequeñas Empresas Para el Año Nuevo. Leyes fiscales para las pequeñas empresas para el próximo período. Consejos de planificación fiscal para pequeñas empresas de fin de año 2020. Pasos para constituir una empresa.
Conduct market research. Market research will tell you if there’s an opportunity to turn your idea into a successful business. Then hire an accountant in Miami. Write a business plan. Fund your business. Pick your business location. Choose a business structure. Choose your business name. Register your business. Get federal and state tax IDs.
Probablemente sea una buena idea que la mayoría de los propietarios de pequeñas empresas se concentren en el núcleo de su negocio, como vender ropa o diseñar sitios web y utilizar expertos Contador Público para ayudarlos en asuntos financieros. Según el IRS, más del 90% de las pequeñas empresas utilizan contadores para preparar sus declaración de impuestos, algo de lo que puede estar muy consciente durante la temporada de impuestos. Pero la declaración de impuestos de impuestos no es la única razón para utilizar un contador (Accountant o CPA en Inglés)
Income statement (also referred to as profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement, or statement of operations) is a company’s financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the “top line”) is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the “bottom line”). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.
Un plan de pagos es un acuerdo con el IRS para pagar los impuestos que adeuda dentro de un plazo de tiempo ampliado. Debe solicitar un plan de pagos si cree que no podrá pagar sus impuestos en su totalidad dentro del plazo de tiempo ampliado. Si califica para un plan de pagos a corto plazo, no será responsable de un cargo administrativo. El no pagar sus impuestos cuando se vencen puede causar la presentación de un aviso de gravamen por el impuesto federal y/o una acción de embargo del IRS. Consulta con Contador Publico en Miami.
How to read a balance sheet In financial accounting, a balance sheet or statement of financial position or statement of financial condition is a summary compiled by the Accountant of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity. Assets, liabilities, and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a “snapshot of a company’s financial condition”. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business’ calendar year.