When you start a new business, it’s easy to get caught up in running everything and forget about paying taxes. But you need to plan ahead to avoid a surprise in April. Business owners should make these three moves before the end of the year to avoid penalties.
Starting a retirement plan can help you deduct up to $54,000 of your own retirement contributions. You can also receive tax benefits for contributions you make for your employees. Depending on your chosen plan, the deadline to open it may be December 31 or your tax filing deadline.
For example, a small business 401(k) needs to be opened before the end of your fiscal year, while an SEP IRA needs to be opened by the time you file your taxes. If you want to keep all your options open so you can choose the most advantageous plan, you’ll need to decide by December.
Did you know that new deductions and credits are added and old ones expire almost every year? The most common are for vehicles, green energy and new technology, but you may be surprised at what other tax breaks are available.
If you’re considering a large purchase in the near future, always check near the end of the year to see whether you can save money by moving it up into the current year or waiting until the new year.
As a general rule, estimated income tax deposits are due at least quarterly. Additionally, sales and payroll tax deposits may be due as often as every week. You can’t wait until you file your tax return to pay these taxes.
“Borrowing” from the IRS by paying income taxes late will lead to added interest and penalties. Paying sales or payroll taxes late is even worse. That money is then considered to belong to the government or your employees not to you. The penalties for failing to pay sales and payroll taxes include heavy fines and possible criminal prosecution. If you haven’t already, make sure you have these deposits set up today.
Choosing a retirement plan, finding deductions and credits for planned spending, and setting up tax deposits are just a few of the steps you should take early on as business owners. Schedule an appointment with your accountant to see if you’re on track and what other moves you might be able to make.
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