November 2013

Happy Thanksgiving!

This week is usually a little slow unless you are in retail. It’s a good time to take a few hours and assess your business results for the year. Compare 2013 results to your budget and business plan, and start thinking about your plans for 2014.

From what I’m hearing, it’s been a decent year for many businesses. That makes this the time for tax planning as well, so I thought I would pass on a few small business tax planning tips. These are just ideas, and you should check with your tax professional to see if they apply in your situation .

1. Get GOOD help. I learned this lesson the hard way – the first several years in business, I tried to have our tax returns prepared as cheaply as possible. Eventually, I learned that a year-round relationship with a CPA that understands small business is an investment that pays off in many ways. You’ll earn that investment back quickly, and not just in tax savings.
2. Section 179 depreciation – This provision allows businesses to deduct some investments in equipment and property in full this year rather than depreciating the expense over several years. The tax savings helps pay for the investment! Shameless plug – many businesses use section 179 depreciation with investments in IT and phone systems. This provision is set to expire at the end of 2013, although it has been extended in the past.
3. Setup a qualified retirement plan – such as a SEP or SIMPLE IRA plan or a 401(k). Along with the tax savings, these plans are a great benefit to you and your employees.
4. Make a charitable donation – share the wealth with others
5. Write off bad debts – I hate doing this as much as anyone, but if the money truly isn’t collectible, it doesn’t do you any good to carry that amount on the books. Write it off, which will reduce your tax liability. It also helps me move on, when I don’t see that amount on the AR report every time.
6. Clean up your inventory – along the same lines as bad debts, writing down or writing off old and unusable inventory is the right thing to do.
7. Accelerate expenses – you may be able to prepay some 2014 expenses such as January rent. This will carry some of your profits into next year.

If you haven’t had the best year, and are expecting better days ahead, then you may want to reverse some of these tips – hang on to bad debts and old inventory, and write them down next year. Also, defer some expenses into 2014 if possible.