Oh, December… this is easily my favorite time of the year and I hope that you also enjoy the holiday season as well.
Enjoy time with your loved ones and I hope you get to take a long vacation from work and business. But before you do this, I’ve prepared an early gift for you: 12 Money-Saving Moves Before December 31st.
Here are the 12 things you need to do before year-end:
1) Now is a great time to check in with your tax advisor. You still have a little time to make changes that will help you maximize your deductions and make proactive changes to your tax return.
2) You can still hire your child for one month this year. Speak with your tax advisor to get proper guidance on this.
3) Always schedule your annual meeting and update your minutes. As a business owner, having annual meeting minutes and legal documents such as an operating agreement are important. These are some of the first things the IRS looks for when auditing your LLC or corporation. You can also get a deduction for having this meeting. For the IRS, having proper documentation is part of "Doing Good Business."
4) Sometimes, you have to delay distributions until next year in order to avoid capital gains tax on over-distributing. If you are an S Corporation filer, you need to pay attention to this today. Check with your tax advisor to see if your distribution is on track.
5) Assess what impact the PPP forgiveness will have on your taxable income for 2020.
6) Implement the accountable plan and take tax-free reimbursements before the year's end. This will help you to take the cash from using things like your home and car for business.
7) Prepay your expenses but be sure to comply with the IRS safe-harbor rule to deduct these within the year.
8) Tax law changes in 2020, such as the NOL carryback, have a significant impact on getting a large refund. With some planning, you may be able to use these law changes to maximize your refund and lower your taxes.
9) Yes, Uncle Sam is still old school and loves keeping receipts. Have your admin or bookkeeper compile these for you and save them to the cloud. If you are thinking “Well, I use a debit or credit card for everything so I am okay”. No, you're not. The IRS still wants receipts for everything. More on this here: https://taxauditguide.rbataxadvisors.com/
10) Your entity structure should be updated for tax savings each year. You may need to change or add a new entity based on your income bracket for additional savings this year.
11) Schedule a call with your bookkeeper to ensure that all your documentation and books are completely updated.
12) Start planning for 2021 and have a wonderful holiday!