Get ready for year-end tax planning

As 2022 winds down, it’s a great time to take a look at the year as a whole and begin to set your goals for 2023. Tax Planning is something that you should definitely be doing as 2022 closes. The proper tax planning can help you pay the least amount of taxes that you can.

Tax Prep Ridgeland MS

Year-end tax planning can allow you to structure certain transactions to save you money. You can accelerate certain expenses so that they can reduce your taxable income for this year. Do you have a yearly subscription that may be coming due soon? Go ahead and pay that for the year so you can claim the expense in 2022.

You can also wait to send certain invoices. This keeps your income down for 2022 since generally businesses are taxed on what you bill not what you collect. If you are doing work in late 2022 you can hold off and invoice your client in 2023 to save yourself from having to claim income you haven’t received yet.

Company structure matters

If your business is a C Corporation, you can also donate to a charitable organization to get the additional tax deduction. There are three different types of donations: Cash, property, and travel expenses. If you are donating Property, the deduction is equal to the fair market value of the property donated. If you are writing a check you can deduct up to 50% of the company’s adjusted gross income. In this case you need to make sure you are donating to a charity that falls within the IRS guidelines for the 50%. Certain private foundations only get you 30% of your adjusted gross income. If you write a check, make sure the charity sends you a gift acknowledgement so that you have proof of the contribution for your taxes. And you can deduct .14 a mile of your mileage to and from any charitable organization or event.

Look toward the future

You could set up or add to a retirement account. Contributions made to retirement accounts for yourself and your employees is generally tax-deductible.

Also, getting your business on quarterly estimated taxes could be something that would help soften the blow of that bottom line taxed owed figure. Your CPA can assist you by projecting your income for the year each quarter/semi-annually, and adjust what you pay in estimated taxes based on that projection.

Look back to see what you may have missed

Year end is also a great time to take a look at the previous year as a whole and then set your goals for the upcoming year. You have an opportunity to look at the past 12 months of data and really look at where you excelled and then maybe where you struggled. Taking some time to look at the big picture in this way can help you refocus your attention to areas that are more lucrative, while maybe letting go of some areas that were not as successful. This isn’t something you have to do alone, either. Ask your CPA about your goals. If your goal is to open another location, your CPA can sit down and give you some helpful suggestions on how to make that happen.