Year-End Tax Planning for Businesses
If your business is a cash-basis taxpayer (if you aren't sure, ask me) and you believe that your 2018 and 2019 profits will be about the same, then pay all of your January bills in December to pull the tax deductions into this year. Using your credit card by 12/31 counts as paying this year, even though you will pay the credit card bill next year. (Note: only works with bank credit cards, not retail cards, such as your Office Depot or Staples card.)
Also, if you need to purchase equipment (including autos) you might want to do so before the end of the year.
If you are thinking about setting up a retirement plan, remember that 401(k)s, including the new "solo 401(k)" must be set up by 12/31. SEP-IRAs can be set up later.
If your spouse or child is active in your business, consider hiring them so that you can contribute to his/her retirement account, too.
If your LLC, partnership, or S corporation lost money in 2018, be sure that you have sufficient basis to be allowed to deduct the losses. This is especially tricky for S corporation owners.
If your S corporation has had a good year, be sure you have paid enough salary to the officers to avoid the IRS hot audit target.
Tax items of general business interest:
Important accounting change: Your category of business expenses called "meals & entertainment" must now be split into "meals" and "entertainment" because only business-related meals are tax deductible beginning 1/1/18.
The deadline for filing Forms 1099 will be here soon. Are you missing any legal names, addresses, or tax i.d. numbers? If so, ask your contractors to give you a signed Form W-9 right away.
Print a hard copy of your 2018 business calendar. This will help document your business-related meals, travel, and car mileage. Don’t trust the electronic version to be uncorrupted and available two years from now during audit season.
Make a backup of your QuickBooks file or other bookkeeping system.
Review your plan for recovering from a cyberattack. Consider adding coverage to your business insurance. It's been estimated that 60% of small companies that suffer a cyberattack are out of business within six months.
If your business involves maintaining an inventory, count your inventory as close to December 31st as possible.
Beginning July 1, 2019, it looks like California employers will have the choice to offer the California Secure Choice Retirement Savings Program to employees. This should be simpler than other retirement plans. I am keeping an eye on this and will send updates to my clients as the program progresses.
Most of your 2017 business records can be packed up. I like to keep last year's records easily accessable for one for year. Mark the 2017 boxes “Destroy 2022.” But see my document retention page for information about what to pull out and keep longer.
You may also want to look at these pages:
Bess Kane, CPA