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11 Year-End Tax Strategies for Your Business

Updated: Dec 20, 2023

Why is it that we always think of saving money at the end of the year? 

The end of the year is a critical time to assess financial performance, identify potential deductions, and make strategic decisions to optimize tax outcomes and minimize tax liability.


Taking a proactive approach to your business finances is the best approach.  Making time regularly throughout the year to identify opportunities for savings and efficiency improvements continuously, rather than reacting to financial challenges retrospectively. It doesn’t hurt to look at things again as the year wraps up to make sure you have done everything you can to keep the maximum money in your pocket and pay the least taxes.  


1. Consider How Your Business is Structured  


If your business is structured as an LLC you can change your structure to an S-corp.  This structure change can be retroactive to the beginning of the current year.  Any business with over $50,000 in taxable profit can benefit from this restructuring.  


2. Plan Your Payroll for January Reporting


By planning for next year’s payroll now you can save on self-employment taxes for yourself.  It's important to consider maxing out your 401K contributions as well.  Remember, if you’re an S-Corp,  the owners' health insurance premiums must be included in gross payroll for the year.  We can help.


3. Get out of Start-up Mode


Close the sale with your newest client. By making a sale and officially transitioning out of startup mode and into business operations you unlock the potential for substantial tax savings.  It is particularly crucial for entrepreneurs looking to maximize tax benefits, as it allows them to take advantage of the up to $5,000 deduction available for startup costs. 


4. Host a Board of Directors Meeting


Depending on how your business is set up you can host a leadership meeting and take advantage of the ability to write off the travel and dining expenses related to the event.  For businesses that operate as a Sole Proprietorship or LLC, you can host a Board of Advisors.  S or C-Corp businesses will have a Board of Directors meeting.  Record the minutes of the meeting for your records.  Not sure who would be on your Board?  You can include your spouse, teenage kids, advisors, and mentors.  


5. Include Family Members on the Payroll  


Paying children and spouses as employees in a family-owned business can have certain tax benefits, but it's important to ensure that such arrangements comply with tax laws and regulations. Kids under 18 who do legitimate work in your business can be paid up to the current standard deduction ( 2023 - $13,850) tax-free! Research this option well and consult with a tax advisor to ensure you are doing it right.  


6. Utilize a Health Savings Account 


A Health Savings Account (HSA) is a tax-advantaged savings account that individuals can use to pay for qualified medical expenses. The enrollment period for a Health Savings Account typically runs from November 1st to January 15th. During this time, individuals can open a new HSA or make changes to their existing HSA, such as adjusting contribution amounts. 


To qualify for an HSA, you must be enrolled in a High Deductible Health Plan (HDHP) For the tax year 2024, having an HDHP is crucial to qualify for the HSA write-off. The contribution limits for HSAs are set annually by the IRS. For the tax year 2023, the maximum HSA contribution is $3,500 for an individual and $7,550 for a family. These limits include both employer and employee contributions. 


7. Get your Financial Books in Order


Taking time at the end of the year to prepare Profit and Loss statements will help you plan better for the following year.  It is a good time to begin preparing 1099s and W-2s for any employees or contract workers you hired this year.  Preparing these documents now will make you ready for tax planning and filing in the new year.  


Now is the time to gather W-9s from all of your vendors, doing this before the new year will make your tax preparations easy. We can help with this


Buy New Equipment or Vehicles


Do the math to analyze the anticipated use of your company vehicle and if mileage deductions or a new vehicle would be better for your bottom line.  Look at section 179 for qualifying equipment and vehicles that qualify for the deduction.  Do your research, it's not beneficial to purchase something only for the tax benefit.  Be strategic for your financial strategy.  We offer tax advisement and can help you discover if this is the right strategy for you.

  

9. Take Advantage of any Capital Losses


Now is a good time to sell any stock at a loss that you plan on selling anyway.  By using previously accrued capital losses, you can minimize the impact of taxable gains, potentially leading to a more tax-efficient investment strategy.  Cryptocurrencies are often considered property rather than securities, as such the Wash Sale Rule is generally not applied to cryptocurrencies at the federal level in the United States.


10. Make Charitable Contributions as a Business


Any charitable contributions made by cash or credit card can be counted as a tax deduction when it's made before December 31st of the year.  You can also donate appreciated stock to the charity of your choice.  Individuals who are over the age of 70.5 have the option to make a Qualified Charitable Distribution (QCD) from their Individual Retirement Account (IRA) to qualified charitable organizations. 


11. Confirm Quarterly Tax Deposits


Before the year ends it is helpful to work with your bookkeeper or tax advisor to determine your quarterly tax deposits for the next year so you can plan accordingly and make a tax strategy for the coming year.  Work with your tax advisor to determine your Federal and state quarterly deposits.  You may also need to pay franchise tax deposits or Sales tax deposits depending on your type of business 


december calendar reminding you to consider year-end tax strategies for your business
Photo by @waldemarbrandt67 on Unsplash

Levelheaded Bookkeeping Can Help You Build Your Year-End Tax Strategy


At Levelheaded Bookkeeping and Tax Services, it is our goal to see you receive the greatest refund possible and pay the least amount of taxes for your business situation. We work behind the scenes for your continued success as a one-stop shop for all their bookkeeping and tax needs. Levelheaded Bookkeeping offers bookkeeping, Quickbooks, tax compliance, tax resolutions, and tax strategy planning services. 


As an Enrolled Agent and Main Street Tax Professional, clients can be confident that things are done right with Levelheaded Bookkeeping. 


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