Start Preparing For Next Year’s Tax Season

Start Preparing For Next Year’s Tax Season

So, tax season is over and you’re feeling relieved. (We were swamped, so we are too!) But this doesn’t give you a free pass to forget about taxes until next year. Now is the most opportune time for an assortment of financial planning tasks that will better prepare you for next year. These tips will not only keep you more organized, but they will help you recognize any changes that should be made to save your business money.

 

Compare your tax returns and review your books

First, take your 2017 tax return and compare it to others from prior years. How much money did you spend on certain expenses? Could future tax consequences change due to the recently enacted tax reform? Look for differences and figure out why these differences exist. Then take the time to figure out if these changes are acceptable and financially beneficial or if you need to make modifications to reduce costs. This process may also help you locate mistakes in the tax return. Lastly, complete these same tasks for your financial reports, and use historical data and current knowledge to project future performance.

 

Update bookkeeping

Not regularly updating your bookkeeping can be an expensive mistake. Make sure you or your accountant updates your business’s bookkeeping to reflect deductions that aren’t allowed for the 2018 tax year, as well as make note of new or revised deductions. This will require breaking up accounts into several subaccounts and maybe even deleting other accounts. Some of the most important deduction changes are as follows:

  • Business owners can still deduct meals, but not entertainment
  • There is an increased deduction for business car depreciation
  • New house mortgage interest deduction is decreased
  • Anyone divorced in 2019 or after cannot deduct alimony
  • Increased medical expense deductions

 

Analyze investments

Take some time to analyze your investments, whether they’re retirement funds or business assets. First, look at how much you put into your Individual Retirement Account (IRA) in previous years and make sure you contribute to it this year. Some IRAs have tax-deductible contributions and some don’t:

  • Traditional IRAs: They are often tax-deductible
  • Roth IRAs: Not tax-deductible, but particular distributions are tax-free
  • SIMPLE IRAs: Tax-deductible
  • SEP IRAs: Tax-deductible

No matter which IRA you invest in or are eligible to contribute to, fully understand what your IRA account constitutes to effectively decide if you should contribute and how much to contribute if you do. As a rule of thumb, you’ll most likely benefit from contributing (if not now then later!).

Work with your accountant to analyze assets that you’re interested in selling to determine what the probable capital gain or capital loss would be. Selling for a loss is the exact opposite of what you want to happen, but have some comfort in at least knowing that investment losses will offset capital gains of the same type.

Considering expansion? The following information can help you decide if your business can afford or really needs new or additional fixed assets. Section 179 allows the cost of certain property to be expensed in the current year, and the maximum deduction was just increased from $500,000 to $1 million. The Bonus depreciation allows businesses to utilize a first-year deduction when a qualifying business property is purchased. There are several new laws that provide incentives for businesses to buy certain assets.

Find more information about the new tax law’s changes to depreciation.

 

Quarterly tax meetings

Meet with your accountant or tax professional, like Paragon Accountants, for financial planning strategies such as estimated tax payments, salary raises and savings plans. Be sure to also ask your tax professional about tax law changes (both federal and state) and how they affect you and your business. Remember, tax and accounting fees are deductible to your business!

Do you need help with financial planning or do you have any tax-related questions? The experts at Paragon Accountants have answers to all your questions, so please contact us today!

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