As 2014 draws to a close, it’s time for small-business owners to start looking ahead to the New Year. That means taking a close look at your finances to see how the business is doing, what your tax situation looks like, and what loose ends you need to tie up. Doing these five things now puts you in a better position to start 2015 off on the right foot.
1. Get Organized
Waiting until just before tax time to start organizing your documents practically guarantees that you’re going to run into problems when it’s time to file. Trying to track down receipts or invoices at the last minute makes the process more difficult than it needs to be. If you’re missing a key piece of information, you run the risk of submitting an inaccurate return, which can come back to haunt you if you’re targeted for an audit. Before the holiday shopping season gets into full swing, set aside some time to go through your files and weed out anything you don’t need. If you don’t have a set filing system, now’s the time to create one. Whether you choose the old-fashioned route and use a filing cabinet and folders or go high-tech with digital receipt-scanning software, the most important thing is to get your paperwork under control.
2. Replace Business Equipment
The CRA provides tax break for business owners who make equipment purchases throughout the year. That includes things like machinery, office equipment, computers and computer software, vehicles, and office furniture. For 2014, you can deduct the purchase price of these items, up to a certain limit. That’s a great incentive to go ahead and make those equipment upgrades you’ve been putting off.
3. Review Your Income
If you haven’t been keeping up with your earnings throughout the year, it’s a good time to take a look at the books. Any significant increase or decrease in what you’re making can have a dramatic impact on your tax filing. Specifically, focus on how your income balances out with any business losses, deductions, or credits you expect to claim. In situations where your income has gone up or you don’t have as many expenses to write off as in previous years, you may be able to minimize your tax liability by deferring part of your income. You can also shift some of your income into the next tax year by waiting to invoice clients.
4. Donate to a Good Cause
The holiday season is all about giving, and you can help your bottom line by giving cash or property to a qualified charity. As long as the donation meets the guidelines and you’ve got the proper documentation to support it, you should qualify for a deduction of your adjusted gross income for the year. How you claim the deduction depends on your business structure.
5. Shore up Your Retirement Account
Small business owners have a variety of retirement savings options to choose from. Aside from helping you grow your nest egg, these types of accounts also offer a tax benefit in the form of a deduction for contributions. If you haven’t maxed out your contributions for the year or you have yet to actually start saving, you’re missing out on a potentially valuable write-off. Every penny counts when it comes to scoring the most tax deductions possible so there’s no reason not to save what you can.