You’ve been busy wrapping the presents, preparing the holiday meal, and getting the house looking great for the guests. There is a lot to think about during the holiday season, but don’t forget to think about your business too! Here are five quick things you can still do in 2011 to close the year out right for your business. Why? Because what you do now will affect how you do come April, when taxes are due. Do yourself a favor and act now to save money later.
1. Snap A Picture of Your Home Office
Many small business owners choose to take advantage of the home office deduction that allows you to write off a percentage of your mortgage or rent, as well as your utilities. You don’t need to decide right now if you should take the deduction or not. But, if you are thinking about it, then you should take a photo of your home office before the end of the year. If you do take the deduction, the photo can serve as a record showing your home office as it looked at the end of 2011. (The photo can also help your accountant get a feel for whether the deduction might be right for you or not!)
2. Get a Read on How Your Taxes Are Shaping Up
You need to know where you stand tax-wise before you take action to improve your situation. Spend 5 minutes seeing how your expenses and income are shaping up for the year. You can do this in a spreadsheet or through a simple online accounting tool, like Outright. You can then decide: Do you need to act now to get some additional deductions? If so, see tips 3 and 4 for some ideas.
3. Make a Donation to Charity
Do you want to do some good this holiday season while also helping your business? Consider donating to charity before year-end. You may be able to get some deductions on taxes by donating. Just remember – if you donate over $500 worth of goods, there are stricter reporting requirements that you need to adhere to.
4. Buy Equipment for Your Business
There is a special deduction for 2011 (which also applied for 2010) that allows small businesses to expense up to $500,000 in equipment purchases. We aren’t advocating that you buy things you don’t need – but, if you have any major expenses that you were already planning on for the new year, such as new equipment or a computer, consider making the purchase now so that it’ll count for your 2011 taxes. Of course, if you can take advantage of holiday sales on these items, that means even more savings for you.
5. Make Note of Remaining Inventory on December 31
For those of you who sell products and have inventory on hand, you will need to know how much inventory you had left on December 31st in order to complete your taxes accurately. It can be quite difficult to remember what you had on hand on Dec 31, so it’s worth keeping track of what you had in stock at the end of the year. You can do this with photos, a spreadsheet, a notebook or just about any other way. Remember that you’ll need to be able to estimate the value of that inventory for your taxes.