We have a few more weeks left before 2018 winds to a close. To some, this simply means parties and celebration. But to business owners and managers, this means a lot of tax planning–and that’s what this manager’s guide to year-end taxes is about.
Year-end planning for taxes can be intimidating and daunting. If 2018 felt like it just flew by, it will feel even faster once you realize how much work you still have to do to prepare for 2019. To that end, approaching this part of the business systematically will help ensure that you get everything done efficiently.
A Comprehensive Manager’s Guide To Year-End Taxes
Take note, there’s a lot of overlap between this section and your internal accounting checklist, which we discussed in-depth in a Guide To Year End Tax Planning Part 1. Rest assured however that all the points discussed in this section are included because it is relevant for your business to be able to wrap up your 2018 accounting.
In addition, year-end tax planning doesn’t necessarily mean you have to get all your taxes in order for December 31st. To be clear, all the paperwork that you have to prepare is meant to get your business ready for the approaching first quarter tax deadline. This checklist should help you get everything sorted in time for that.
Manager’s Guide to Year-End Taxes #1: Start By Going Over Your Books
The end of the year is the perfect time to check your company profit and loss statement. Check for red flags and go over it carefully with an accountant if possible. You have the option to make adjustments as tax season gets closer, but it’s best to review everything while the context is still recent and fresh.
Be sure to check out our comprehensive CEO guide to accounting if you haven’t already, to resolve any accounting concerns.
Manager’s Guide to Year-End Taxes #2:
Compile A Thorough Expense Report
Expense reporting can be difficult if you don’t make an effort to gather and organize your receipts before the year ends. While tax season doesn’t officially start until March, you want to avoid having to sift through piles and piles of receipts just to catch up.
Remember, the IRS could do an audit of your filing as far back as six years. So we always recommend that you keep an organized record of your receipts for that long.
Manager’s Guide to Year-End Taxes #3:
Thoroughly Assess All Possible Deductions
Deductible business expenses are subject to limitations and timing. While there are multiple expenditures that you can write off, you have to know which ones are actually applicable for your 2018 tax returns.
Check out our list of the most common expenses that you can write off—
- Vehicle expenses: Most businesses, especially small to medium enterprises, use a car or van as part of their operations. Make sure you have the required records to prove business usage and keep the necessary paperwork for maintenance.
- Salaries and wages: Any payments made to employees, including salaries, bonuses, commissions, and fringe benefits can be written off.
- Contractual labor: These days, businesses rely on a lot of independent contractors or freelancers to meet their operational needs. The costs incurred to avail of these services are deductible.
- Office supplies: This can include everything from paper and printing supplies to cleaning supplies.
- Depreciation: This deduction is specific to any kind of equipment or property that you may have purchased for your business.
- Business property rentals: The cost of renting an office space, storefront, factory, or any kind of facility necessary for your operations is deductible.
- Utilities: Electricity and other essential utility costs that you incur, including mobile phone bills, Internet, landlines, can be written off.
- Insurance: If your business took out policies for malpractice, flood insurance, cyber liability, or anything similar, take note that these are fully deductible.
- Repairs: Common repairs and maintenance costs for office equipment are fully deductible.
- Travel: Travel expenses incurred for official business reasons, including lodging are deductible. This includes everything including plane fare, lodging, meals, and even incidental expenses such as cab fares, travel fees and taxes, and tips. You can visit the IRS site for in-depth information about this.
- Charitable contributions: Corporate social responsibility and giving back to communities is intrinsic to business these days. To that end, know that your charitable donations are actually deductible. Cash donations, including those made via check, credit card, or payroll deductions are among the easiest to make and substantiate for tax purposes.
One final thing…
Tax planning is a year-long process. In truth, preparing all the documents and paperwork necessary to get everything in order isn’t something that you rush to do in just a month.
If you want to ensure accuracy, you have to make a conscious effort to be more diligent about gathering receipts, organizing your books, and keeping track of the necessary paperwork required for tax season.
The biggest mistake that businesses make is waiting until the very last minute to review their tax situation. Granted, it is possible to assess everything in a limited time. But it’s hardly the easiest thing to do. Why put yourself and your company through the hassle of something that’s completely avoidable?
So before we wrap up this manager’s guide to year-end taxes, here are two things that you can do moving forward to ease the stress of annual end of the year tax planning:
- Never make major business decisions simply to get a tax break.
- Plan throughout the year—on-board an accountant who can help you stay on top of your tax planning and keep you in the loop of possible tax situations.
There you have it. If you have any questions, feel free to leave us a comment below. Otherwise, be sure to watch out for the final part of this comprehensive year-end business wrap up as we tackle your company’s IT and tech requirements.