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7 Year-End Tax Tips for Small Businesses

This year has been much better for small businesses than the last two years. With the world finally adapting to the post-pandemic era, people are returning to their regular routines, and companies finally see improvements in their sales and operations. In fact, $6.6 trillion worth of sales were generated in US retail stores in 2021, a massive increase from the previous year.

And as the year ends, it is time for small businesses to face one of the most tedious processes in managing one–filing and paying taxes. This year-end bill is always considered a challenge, especially when you are not entirely keeping track of your business’ finances.

But that shouldn’t always be the case. As an outsourced accounting service provider, here are seven year-end tax tips from us that you can apply to your small business:

Separate business and personal finances

One common mistake start-up founders make is mixing personal money with business finances. This can put you at risk because authorities might mistakenly record your personal expenses as business-related.

Avoid this by opening a bank account solely for your business transactions. That way, you can keep your personal expenses private while maintaining a clean record with the authorities

Defer your income

Another way to minimize your taxes is to defer your income. This does not necessarily mean delaying your and your employees’ salaries for December, but what you can postpone for a bit is the year-end bonus (should there be one). Income earned during late December can be accounted for the following year, so the taxes for those transactions will be logged later.

This tip should be discussed with an accounting professional beforehand for guidance and insights on which incomes should be deferred.

Consider large year-end investments

As a small business owner, your tax return can be deducted when you purchase business-related upgrades such as vehicles, equipment, or software at this time of the year. Under the Section 179 deduction of the US internal revenue code, business properties can be considered for tax deductions when they qualify in the dollar amount range allowed by the code.

The investment should, however, improve the overall performance of your business. The value of your purchase can be questioned if it does not increase the long-term profitability of your business.

Keep every receipt

Keep track of your expenses diligently. You are basically wasting money when you fail to record company expenses. Deductions, sometimes known as tax shields, do not provide the same dollar-for-dollar tax bill reduction as credits. Instead, they reduce taxable income.

You pay business taxes depending on your company's taxable income, which is the difference between revenue and deductions. Maximizing deductions is an important technique to lower your taxable income and, thus, your tax liability.

Improve retirement plan

Employees love benefits like retirement plans, which allow them to secure their present and future. But did you know that it can also lower your tax return?

Aside from the typical 401(k) contributions, your small business can save on tax up to 25% or $54,000 while improving the retirement plan or retirement account through Simplified Employee Pension Plan (SEP). This program will let employers set aside money for their employees' retirement.

Donate to charity

Many companies donate to charity not only to give back but also to minimize their taxable incomes. While it is true that donating is indeed a rewarding act, businesses also take this step to improve their tax preparations.

It does not need to be a cash donation. Items such as clothes, shoes, toys, or relief goods can already put a smile on other people’s faces. And as long as they are documented in a receipt, it can be listed as a transaction that would lessen your company’s tax return.

Hire a professional

As a small business owner, it is understandable that you want to save on expenses as much as possible. Being an all-around employee can do the trick, but hiring a professional accountant or bookkeeper should be considered when it comes to your business’ finances and tax preparations.

Tax filing is incredibly complex. Make one errored transaction, and your taxable income can change drastically. A tax expert can help you double-check your financial data and advise on improving them while maximizing the leeways for small businesses’ tax returns.

The cost of an accountant's services depends on the size of your business. You can opt for outsourced accounting services as it also provides excellent service at an affordable rate.


April isn't the only month to think about taxes. Keep these tax tips in mind and be prepared to maximize deductions and credits on your tax returns. If you realize that your business could benefit from any of these tips, get in touch with us today. A trusted Peach BPO advisor will be happy to help you plan your company's year-end preparation.

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