Year End Tax Planning Tips for Your Business

November 20th, 2023

As 2023 winds down, here are some ideas to help you prepare for filing your upcoming tax return:

  • Collect TINs for informational returns. Identify all vendors who require a 1099-MISC and a 1099-NEC. Obtain tax identification numbers (TINs) for each of these vendors if you have not already done so.
  • Shift income and expenses. Consider accelerating income, or deferring earnings, based on profit projections.
  • Be prepared to receive a Form 1099-K. You may receive a Form 1099-K from each payment processor from whom you receive $600 or more in payments. In addition to credit card companies and banks, payment processors can include Amazon, Etsy, PayPal, Venmo and Apple Pay. You’ll need to include the 1099-K on your tax return.
  • Categorize income and expenses. The best way to prepare for receiving a 1099-K is to organize your records by major categories of income, expenses and fixed asset purchases. If your accounting records are accurate, then any tax form, including a 1099-K, should be easy to tie out to your books.
  • Separate personal and business expenses. Review business accounts to ensure personal expenses are not present. Reimburse the business for any expenses discovered during this review.
  • Create expense reports. Having expense reports with supporting invoices will help substantiate your deductions in the event of an audit. Furthermore, you should ensure all business credit card statements have corresponding invoices.
  • Utilize fixed asset planning. Section 179, or bonus depreciation expensing, is a great planning tool. If using Section 179, the qualified assets must be placed in service prior to year-end.
  • Leverage business meals. Business meals with clients or customers are 50% deductible. Retain the necessary receipts and documentation that note when the meal took place, who attended, and the business purpose on each receipt.
  • Take part in charitable opportunities. Consider any last-minute deductible charitable giving including long-term capital gain stocks.
  • Review your cell phone record. Review your telephone records for qualified business use. While expensing a single landline out of a home office can be difficult to deduct, cell phone use can be documented and deducted for business purposes.
  • Evaluate your inventory. Review your inventory for proper counts and remove obsolete or worthless products. Keep track of the obsolete and worthless amounts for a potential deduction.
  • Examine your receivables. Focus on collection activities and review your uncollectible accounts for possible write-offs.
  • Review your estimated tax payments. Recap your year-to-date estimated tax payments and compare them to your forecast of full year earnings. Then make your 2023 4th quarter estimated tax payment by January 16, 2024.

Filing for the first time? Read our tax return to-do list for small businesses. Our team is here to help you get the most out of your tax return. Gain financial peace of mind at dpcpa.com/contact.