When do you do your year-end tax planning? For a lot of people, if they talk about 2012 taxes before 2013, they’re doing great. This year is going to be different though.
Taxes are going up and if you don’t plan now for 2012, you’re going to lose the window of opportunity.
That’s why we’re starting our year-end tax planning series early this year.
So, let’s start with 5 tax tips for 2012, that you MUST put in place in the next 30 days. Wait too long and you’ll pay a lot more in taxes.
#1: Don’t wait.
That’s the most important tip I can give you this year. If you wait until December to put year-end tax planning into place, you’ll probably be too late.
In fact, for the first time EVER, I’m cutting off tax strategy appointments after December 10th. That’s because we’re not sure we can implement strategies after that date.
The problem is that in the middle of all of these federal tax changes, the states have been making some changes of their own.
They’ve cut back staff and staff hours. They’ve reduced their services. Instead of getting corporations formed in a couple of days, it now takes a couple of months. And that’s even if you pay the expedite fee to set them up faster.
Don’t wait until it’s too late to do your year-end tax planning.
#2: Know your numbers.
If you schedule a year-end tax strategy with me, the first thing I’ll ask for is your most current financial statement.
I need the financial statement to do tax planning. Without good numbers, we’re all just taking a guess as to how much your income actually is.
Some common mistakes with last-minute non-expert-prepared returns are:
- Assets and expenses confused. When you pay for something, you could be buying an asset (which needs to be depreciated over time) or you could be paying for an expense. If you get this confused, it can change your bottomline.
- Failure to properly record payroll expenses. You should record the gross wages page and show the withheld taxes first as a liability and then offset when you reimburse to the state and federal government. The extra taxes you pay are an expense.
- Not showing your inventory. If you sell products, the IRS will expect to see you reporting your inventory at year-end. You might not have the current number now, but remember you need to count and value it at year end.
- Not reconciling your bank account and credit card statements.
If you’re not comfortable with your current bookkeeping support, come check out Cash Flow Accounting or give Richard a call at 888-592-4769.
#3: Check out your business structure.
If your business is changing, chances are you are long overdue to look at changing your business structure. This is where advance planning will be important. One of the strategies we’re talking a lot about these days is the use of a C Corporation. As individual income tax rates go up and deductions are lost, the C Corp becomes an even better choice.
#4: Pull together your business expenses paid personally.
One of the ongoing trouble spots for a lot of small business owners is trying to track their business expenses when they pay for them personally. If you have those kind of expenses, then make sure your business books reflect the expenses before year end.
The best answer is to have your business expenses paid ONLY from your business account and with your business credit card.
#5: Determine how Taxmageddon will affect you.
Tax rates are going up, deductions are going down and there are new taxes. How will this change your plan for 2012?
If you are concerned about your tax plan, do something now! Give Richard a call at 888-592-4769 to find out how we can help you.