Top 5 Tax Preparation Tips for Small Businesses Before the Year Ends
- Audit Advantage Group
- Nov 18, 2024
- 4 min read
Updated: Dec 10, 2024
As we near the end of 2024, now is the perfect time for small business owners to get their finances in order and prepare for the upcoming tax season. Proactive planning can help you reduce your tax liability, avoid penalties, and start the new year on the right foot. At Audit Advantage Group, we’ve put together five essential tax preparation tips that will help you finish 2024 strong and ensure you’re ready for tax time.
1. Review Your Financial Records
The first step in preparing for tax season is to make sure your financial records are accurate and up to date. Take a moment to review your income statements, balance sheets, and cash flow. Check that all transactions have been recorded correctly, and make sure your receipts and invoices are organized.
If you’re using accounting software, run a year-end report to spot any discrepancies. If you’re still keeping track of things manually, now is the time to double-check your numbers. Correcting any errors before you file your taxes will save you time and reduce the risk of audit issues down the line.
Pro Tip: If you haven’t already, consider working with an accountant to make sure your books are in order. A professional can help identify deductions you might have missed and ensure you’re prepared for any tax changes. AAG can help you out.
2. Maximize Your Deductions
One of the best ways to reduce your taxable income is to take full advantage of all the deductions available to your business. Small businesses can deduct a wide variety of expenses, such as:
Office Supplies: Anything you need to keep your business running, from computers to pens, can be deducted.
Business Expenses: Travel, meals, and entertainment directly related to business activities are deductible.
Employee Benefits: Contributions to employee retirement plans or health savings accounts (HSAs) can also lower your tax bill.
Make sure you’ve accounted for all eligible expenses, including any last-minute purchases you may need to make before the year ends. Buying equipment or office supplies before December 31 can help you maximize your deductions for 2024.
Pro Tip: Keep track of receipts throughout the year, and don’t forget about smaller expenses like business-related software or subscriptions. They all add up!
3. Take Advantage of Tax Credits
Tax credits can reduce your tax bill dollar-for-dollar, making them one of the most valuable tools for small business owners. While deductions lower your taxable income, credits directly lower the amount of tax you owe.
Some common tax credits for small businesses include:
Research & Development (R&D) Credit: If your business invests in new products or technologies, you may qualify for the R&D credit.
Small Business Health Care Tax Credit: If you provide health insurance for your employees, you might be eligible for a credit.
Energy Efficiency Credits: Installing energy-efficient equipment or making energy-saving improvements to your business property could qualify you for credits.
Be sure to review the credits available to your business and work with a tax professional to make sure you’re taking full advantage of them.
4. Make Estimated Tax Payments (If Needed)
If your small business is structured as a sole proprietorship, partnership, or LLC, you may need to make estimated quarterly tax payments. These payments are based on your expected income and can help you avoid a large tax bill at the end of the year.
Before the year ends, take a look at your current tax situation. If your income has fluctuated or you haven’t made your estimated payments, it’s a good idea to calculate how much you owe and pay it before December 31. Paying estimated taxes can help you avoid penalties and interest when you file your taxes in 2025.
Pro Tip: Use accounting software or consult with an accountant to help you calculate your estimated taxes. They can help you avoid underpayment penalties and ensure you're staying on top of your obligations.
5. Plan for 2025 and Set Up Retirement Contributions
While tax planning for 2024 is essential, it’s also important to look ahead and prepare for next year. One way to lower your taxes and build long-term wealth is by contributing to a retirement plan for yourself and your employees.
If you haven’t already, consider setting up a Simplified Employee Pension (SEP) IRA or a Solo 401(k) before the year ends. Contributions to these plans are tax-deductible, which can help reduce your taxable income for 2024. Plus, starting your retirement contributions now sets your business up for success in the future.
In addition to retirement planning, review any changes you expect in your business for 2025. If you’re planning to hire new employees or make other significant changes, work with a tax professional to understand how these changes will impact your tax situation.
Conclusion
By taking a proactive approach to tax preparation now, you’ll not only save money but also reduce stress when tax season arrives. Start by reviewing your financial records, maximizing your deductions, and taking advantage of available tax credits. Don’t forget to make any necessary estimated tax payments and plan for the future by contributing to a retirement plan.
If you need assistance or have any questions about tax planning, Audit Advantage Group is here to help. Our team of experienced professionals can guide you through the process and ensure your business is in the best possible position for 2025.
About Audit Advantage Group
At Audit Advantage Group, we specialize in helping small businesses navigate tax preparation, planning, and audits. We’re committed to providing straightforward, expert advice tailored to your business needs. Contact us today to learn how we can assist you in optimizing your tax strategy and setting your business up for success.