The snow falls on the cedar elms. Children build a jolly snowman outside your office. The windows fog as winter’s breath clouds them up. And here you sit in the office – working on year-end accounting.
Yes, the end of the year is nigh for businesses, and that means payroll tax reporting/payment, W2 reporting, sales tax reporting/payment. If the end of the calendar year is also the end of your fiscal year, corporate income tax preparation joins the fray. What type of shape are you in?
As all accountants know, the rules are always in flux. The end of year planning now is paramount because it represents the last shred of certainty before the nation is plunged into a din of uncertain tax futures. Taxes are expiring, groups are calling for drastic tax reform and all of it is happening at the stroke of midnight on December 31.
These end-of-year responsibilities can stressful for small or mid-sized businesses with few accountants. For those who simply cannot handle it all, there are payroll solutions in outsourcing, but for those firms tackling the mammoth task on their own, here are a few tips.
- Keep your eyes peeled for local tax credits that could ease your tax burden. The IRS keeps a table of possible deductions for businesses based on local and state sales tax rates. Sales tax for company vehicles (boats, autos, airplanes, etc.) can be deducted from and added to the amount shown in your state’s table. Small business health-care tax credits and others might pass under the radar of small businesses.
- This is a good time to determine, if you haven’t already, what type of business entity is best for your business going forward. This is more of a decision for founders, owners and CEOs rather than CPAs, but it is an important call given the ongoing tax turmoil in the nation. Medicare contributions will rise to .9 percent for self-employed income. Speaking of Medicare, there will be an unearned-income increase of 3.8% assetssed by looking at interest, annuities, dividends, capital gains, passive income and rents. Changes won’t take place until 2013, but you should begin planning for it now.
- Businesses that have invested heavily in research and development may have a big payday coming their way. A common misconception is that large businesses are the only types that can reap tax benefits from R&D. As a result, many small businesses overlook this tax deduction that could save them a bundle.
- If the company owns the building in which it operates, it’s a good idea to take a closer look at property tax bills. The value of property is in flux as areas develop, the dollar is weakened, and other global factors act on the value of a property. Property taxes are often based on an incorrect valuation. Reevaluate those numbers to see if there is any money hiding.
In this climate of tax reform, colored as it is by the budget crisis, debt ceilings and super committees, change is imminent. The end of 2011 will also mark the end of many tax benefits that businesses have enjoyed for the last few years. They should be taken into account through 2012 and into 2013.
Fiscally, December is the busiest month for many businesses, but there is a light at the end of the tunnel and it is called New Year’s!