With the end of the fiscal year fast approaching, small business owners everywhere are getting their end-of-year tax planning in order. Where payroll is concerned, many businesses are eager to find ways to cut down on their tax obligations and save money.
If you’re adept at financial planning for your small business, this is easily attainable, but only so long as you plan ahead and understand what changes will yield savings for your organization. With that in mind, here are five steps every entrepreneur should implement to maximize their savings at the end of the year.
1. Give yourself enough time to handle the various tax forms.
Taxes for a small business can be complex, and if you’re rushed to complete the necessary forms on time, you could miss out on key deductions and other opportunities to save on payroll costs and other tax considerations. Don’t put off until the end what you can chip away at well in advance — start addressing tax forms and other payroll concerns before the end of the year hits, giving you more time to effectively plan.
2. Implement payroll software to improve payroll efficiency
If you’re losing a lot of hours every week to managing payroll needs, don’t get discouraged and decide that you need to hire help to manage your growing demands. Payroll software can manage many of these tasks for you, improving organization and even aiding in some automated tasks. It may be too late in this calendar year to get too much benefit out of payroll software for 2012, but if you have it in place when the new fiscal year starts you can maximize your benefits in the next tax year.
3. Take care of payments online through automated programs.
Direct deposit eliminates the need to cut a paper check for your employees. But it’s not just payroll that can benefit—set up automatic payments for all of your bills and vendors, minimizing the time you spend handling these expenses and ensuring you’re never late on payments.
4. Include bonuses in end-of-year payroll work.
Many businesses and industries employ the common practice of dispensing end-of-year bonuses to their employees. But business owners need to remember that bonuses are still subject to tax withholding. Never pay a bonus without processing it through payroll—it’s an easy way to get into hot water with the IRS.
5. Have charities receiving donations from your business process the checks before the end of the year.
Donating to charities is a great way to give back to the community while reducing the amount of taxes the organization owes. But in order to reap those benefits in this tax year, the charity needs to cash the check before the end of the calendar year. Make donations ahead of the deadline and remind those organizations that you would like the check cashed as soon as possible.
For many businesses, payroll errors can lead to a lot of unnecessary work. If the IRS gets involved, the mistakes could carry hefty penalties. As a small business owner, take time to invest in your payroll operations and make sure you’ve created a situation that will maximize tax breaks and payroll efficiency without creating more problems for your daily operations.