Today I am going to talk to you about a year-end checklist for business owners. As we approach the end of the year, we want to make sure we have everything dialed in for our business and personal taxes. I am going to give you a few pointers to consider when talking with your CPA, as well as, some things for you to think about to make sure you are optimizing a tax plan for the current year.

Video Transcript - Year End Checklist for Business Taxpayers

Today I am going to talk to you about a year-end checklist for business owners. As we approach the end of the year, we want to make sure we have everything dialed in for our business and personal taxes. I am going to give you a few pointers to consider when talking with your CPA, as well as, some things for you to think about to make sure you are optimizing a tax plan for the current year.

The first question that I would ask you is, have you made all of the equipment purchases that you plan to make for the year? Now I know a lot of times the old answer was how do I lower my taxes? Oh, go buy a vehicle or oh, go buy a piece of equipment. I am not telling you to go buy something you do not need just to obtain a deduction. What I am telling you is to take a close look at your business, to take a close look at the resources, the equipment, assets, other things that you are using, software, and make a determination about whether or not you need to take something to the next level or replace something, because there is no time like the present, with the new tax reform, to buy equipment.

Before 2018, we could take bonus depreciation, which is essentially being able to write off half of the cost of an asset purchase. We could only do that on new equipment. Had to be brand new. Part of the tax reform says we can take bonus on used equipment now. So now we have got Section 179, we have got bonus, we have got expanded depreciation rules. No reason why we should not at least consider replacing some of our equipment, machinery, vehicles as part of our year-end tax plan. But do not wait. do not wait till it is the last week of the year or it is the holidays or you are busy with other things. Ask yourself that now. Take the time to think about making an investment in your business that is going to help improve your efficiency in the years to come.

The next thing that I would ask you to consider is number one, if you have a qualified retirement plan set up, like a 401k plan, which usually has a profit sharing component, defined benefit plan, otherwise known as cash balance, or deferred compensation, there is a lot of qualified plans that can be constructed and implemented to help save you money on taxes. But it is not easy to do the last week of December.

This is something that really should be done right now, before the holidays, before we get to December, and most financial advisors and most plan consultants are going to tell you that they need at least 45 days to construct a proper plan for you. And if you have not looked at these, or if you have heard that oh, they are too expensive or oh, they are hard to do, I would challenge you to look into that a little bit closer. Talk to your CPA. Your CPA can refer you to a competent financial planner who can tell you more about this plan, like what the cost is going to be and what the benefit is going to be to you. Your CPA will help with that part. So make sure you ask that question. My qualified plan, what is going on with that?

Finally, do I need to take a bonus? Of course, we would all love to say yes to that, but there is a couple of more strategic reasons why you should ask yourself that question. Number one, a lot of times, instead of making quarterly estimated payments throughout the year, business owners will pay themselves a bonus towards the end of the year, and allocate additional funds to federal income tax withholding so that they meet their obligations to avoid any underpayment penalties for the year. And another reason may be to increase their compensation so that they can take the maximum contribution deduction into that qualified plan we just talked about. You have to pay yourself a certain amount of money to be able to take the maximum deduction.

Finally, when you are taking that bonus, consider this, taking some salary, but also making sure that you are taking advantage of distributions of profit, as well. Now, I know that is a very tricky area. We could do a whole video on that in and of itself, and I think we have, but talk to your CPA about that. Ask them if you are going to take a year-end bonus, should it be all salary? Should some of it be distribution? Which is better? Ask them that question. They will have an answer for you.

If you have any questions, comments, or ideas for future videos, please let us know.

####