Shocking as it may seem, 2018 is already more than 90% over. Yes, that means the holidays are on our doorstep, but hot on the heels of New Year’s Day is Tax Day. It is a great time to get 2018 in order for the IRS in the weeks right before the frenetic days of shopping and celebrating.
There are some things you can do in the waning days of 2018 in order to reduce your upcoming tax bill, but in most cases you need to get going before the clock strikes midnight on December 31.
Set up a retirement plan.
If you have been considering a retirement plan, now is the time to finally talk to a financial advisor and set one up. Contributions to a retirement plan will reduce your business income and your tax bill. If you already have a retirement plan, you should attempt to add to it in order to max out your deductions, not to mention provide for your future self.
Small business owners have several different options for retirement plans, including various IRA, 401(k) and profit-sharing plans. Therefore, it is really best to consult an expert before December 31 to find out what plan is best for you and your business.
You should also ask about payment schedules – in some cases, the IRS allows deductions for certain retirement plans until you pay your taxes in 2019. For other plans, you would have needed to make contributions earlier this year.
Go shopping – for your business.
The month of December is your last chance to buy items for your business and have it still count as a 2018 tax deduction. Now is the time to look over everything and determine if there is anything your business needs to succeed in 2019 – should you upgrade computers or stock up on printer paper? You could even see if any vendors will take payments in advance for work expected next year.
These types of expenses are one of the best ways to maximize deductions, but you need to spend the money this calendar year. It is a fantastic investment of any surpluses you find yourself at the end of the year.
Reschedule expenses and revenue.
As we near the end of the year, you should take a look again at how much your business is earning and spending for the month of December, especially if you had a particularly profitable 2018. You may want delay billing your clients until January, when it will count as 2019 income. You could also reschedule the delivery of products or services until the New Year.
Conversely, spending money now for 2019 expenses will reduce your business income. This includes not only purchasing business equipment or supplies, but paying registration fees for a 2019 conference.
Of course, if you forecast 2019 to be significantly more profitable than 2018, you want to do the opposite. You should try to vacuum any income you can before January and delay expenses until 2019, if possible. In this case, you are trying to reduce your tax bill that will come due in 2020.