- Small Business Trends - http://smallbiztrends.com -
Summer Financial Checklist For Small Business Owners
Posted By Nellie Akalp On July 20, 2012 @ 4:00 pm In Finance | 4 Comments
Now that summer is well under way, our focus is often on beaches and barbecues, not necessarily business finances. Yet the mid-way point is the perfect time to review the financial and tax health of your business.
Financial planning is an ongoing process for small business owners and taking actions now can help you lower your 2012 taxes and put you in a stronger financial position for the year ahead.
Here are seven steps to take once we’ve hit the midpoint:
1. Meet With a Tax Advisor
Too often small business owners wait until it’s time to file their returns to start thinking about taxes. Have you ever met with a CPA or tax preparer and been told you could have lowered your tax payments if only you had acted earlier?
Make a mid-year appointment when you’ll both have more time to discuss your financials. Most importantly, you’ll still have plenty of time to act on his or her suggestions within 2012. Or you can register for a free Small Business Tax Training webinar to get a handle on commonly missed deductions, available tax credits, and more.
2. Assess Your Estimated Tax Payments for 2012
Now that we’ve hit the midway point, review what your business has made year to date and your forecast for the rest of the year. Then assess your estimated tax payments to avoid underpayment penalties, as well as overpayments (you could be doing more with that money). Adjust your final two estimated tax payments for 2012 as needed.
3. Re-evaluate Your Business entity
Many small businesses start out as sole proprietorships or partnerships, but then eventually transition to another entity. For example, if your business is not incorporated, you may want to consider incorporating (either as a C Corp, S Corp, or LLC) to shelter you from some financial risk and possibly save money on taxes. Sometimes an entity is formed with one income target in mind, and you might need to reconsider the entity for a different income level. Failing to adjust your business entity for your revenue can be a costly mistake. Discuss the different legal entities with your CPA, so you can determine the right entity for your situation and the right time to make the change.
4. If You Have an S Corporation, Review Your Salary and Distribution Requirements
If your business is structured and taxed as an S Corporation, make sure your salary and distribution payments are at the optimal levels. Too often, S Corp owners don’t properly balance the amount the S Corporation pays them as salary vs. distribution. The result can be either higher taxes or an increased audit risk.
5. Take Charge of Your Recordkeeping
To make the most of your business tax deductions, you’ll need accurate, comprehensive records. If you haven’t been keeping track of your business expenses, get caught up now. If you find yourself struggling with this administrative task, look for a new solution ? whether it’s offloading the task to someone else, investing in a technology solution (like a receipt scanner or iPad app), or dedicating 30 minutes each week to expense tracking. You’ll be grateful come tax time.
6. Plan Equipment Purchases
Take advantage of a first-year expense write-off for equipment placed in service by the end of the year. Business owners and self-employed individuals are allowed a first-year depreciation deduction of 50% of the cost of qualifying property acquired and put in service in 2012. For 2012, the maximum amount that can be deducted under Section 179 is $139,000 (inflation adjusted). Based on current law, the limit is set to fall to $25,000 next year. While we can’t predict what will happen in the future, if you’re considering taking advantage of this tax deduction, you should do it in 2012.
7. Plan for Retirement
If you haven’t done so already, take time to set up a retirement plan or reassess your contributions. Contributing to an IRA, Keogh, simplified employee pension (SEP), or other retirement plan is an essential way to plan for your future and reduce your taxable income. The specific rules, contribution limits, and deadlines vary by plan. Make an appointment with your CPA to discuss the best retirement option for your business.
I know it seems like the ink has barely dried on your 2011 taxes, but remember that the best time to plan for your taxes and financial health is 365 days a year.
Dollar on Beach  Photo via Shutterstock
Article printed from Small Business Trends: http://smallbiztrends.com
URL to article: http://smallbiztrends.com/2012/07/summer-financial-checklist-small-business.html
URLs in this post:
 Dollar on Beach: http://www.shutterstock.com/pic-25178401/stock-photo-sand-dollars-making-a-border-with-a-dollar-bill-on-sand-background-sand-dollar-border.html