It’s the end of the year! Sleigh bells are ringing, holiday sales are finished, business has slowed down a bit, and it’s time to take that much-needed vacation. Right? Wrong. By the end of December, you only have a few more days to maximize deductions for this year’s taxes. This means that your taxes need to be essentially finished before the 31st.
Ok, ok. So, doing your home business taxes in December may sound like a task for the overachievers, but in reality, all big businesses are doing exactly this. If you are an independent business owner, you too need to dig out those receipts and start reconciling. Why, you ask? Well, once the current year is over, your income, expenses, and deductions are locked in permanently. There can be no, “Darn, I wish I would have spent more/less”. If you wait until April only find out you owe a bunch of money, it’s tough luck. Believe me, there is nothing worse than finding out you owe hundreds or even thousands of dollars you don’t have. With a little bit of foresight, this situation can be avoided entirely.
Now, in most cases, you should be doing a budget analysis on a quarterly basis, but the end of the year is the most critical time to make sure that your finances are in check, so that there will be no nasty penalty surprises when the new year begins. If you review your financial situation, discover that you owe more than expected, but still have money in the bank, why not take advantage of your expense deductions? Buy some new equipment, stock up on supplies, sign up for a subscription service. All of these are perfectly legitimate ways to lower those taxes, while benefiting your business directly. Worst case scenario, if you are out of cash and facing a huge payment, you will at least know what you’re up against.
So, let’s hop to it! Don’t let the end of the year be an excuse to rest on your laurels. I recommend using H&R Block’s e-file right now to make sure you are fully prepared for what’s to come. The software is easy to use and very accurate. I’ve used it with great success for the past three years. There is a $20 fee to complete the Schedule C, but you only pay when you’re finished and are ready to print or file in the following year. TurboTax offers a significantly more pricey solution, but with more bells and whistles. If you are on a super tight budget, you can use FreeTaxUSA to file Federal at absolutely no charge.
Note: I am not a certified accountant. I am an independent business owner offering my perspective based on personal experience.