While end-of-year festivities promise relaxation and fun for most, business owners may struggle with anxiety over their holiday budgets. Tax season is right around the corner, and after a tumultuous year for America’s economy many entrepreneurs have found themselves unable to enjoy the holidays. Andrew Poulos is the Principal at Poulos Accounting & Consulting, which has provided clients with sound financial advice since 1995. Today he joins Jim Fitzpatrick, host of the Atlanta Small Business Show, to give his tips for last-minute tax preparations.
Before anything else, business owners should examine their company’s financial records. It is essential to understand where its finances stand, whether it made a profit or a loss, and what deductions it could qualify for. While tedious, this process will reduce long-term stress, and inform the financial strategies entrepreneurs should use to create successful holiday budgets.
Don’t delay bonuses
Financial incentives for employees are perfect for motivation and productivity. However, for businesses to earn deductions from paid bonuses in the coming tax season, the checks need to be processed by December 31st. This means that holiday spending should be completed ahead of time as much as possible. For those concerned about direct deposit, Poulos notes that so long as the financial institution records the transaction before the new year they will count in a 2022 filing.
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Take note of assets
Certain expenses and purchases can qualify for deductions. However, Poulos warns the benefits only apply if the items were in use before the year’s end. For example, a car purchase made this December will only receive a credit on 2022’s return if it was driven by its new owner before January 1st. Many entrepreneurs naturally believe that assets count once money is exchanged, causing them to erroneously claim the transactions on that year’s forms. However, if an IRS audit discovers that the purchased item was not used, it may accuse them of tax fraud. Those looking to balance holiday budgets should take note of when expensive items are used to ensure they don’t overlook this overlooked but important rule.
Many business owners find themselves in a cash crunch as the year winds down. However, simple planning, knowledge of IRS policies and attention to detail can alleviate much of the stress. Before December ends, entrepreneurs should make sure to review their holiday budgets and company expenses so that they can hit the ground running when tax season arrives.
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