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Year-End Tax Planning Tips for Your Business

As we approach the end of 2023, consider these suggestions to get ready for filing your upcoming tax return:

Information returns: Recognize all vendors necessitating both a 1099-MISC and a 1099-NEC. Secure tax identification numbers (TINs) for each of these vendors if not already obtained.

Adjusting income and expenses: Evaluate the option of expediting income or delaying earnings in alignment with profit forecasts.

Anticipate the receipt of a Form 1099-K. You might be issued a Form 1099-K by each payment processor if your payments from them amount to $600 or more. Payment processors encompass entities such as Amazon, Etsy, PayPal, Venmo, and Apple Pay, in addition to credit card companies and banks. It is essential to incorporate the information from the 1099-K into your tax return.

Organize income and expenses into categories. To streamline the preparation for receiving a 1099-K, arrange your records into key categories such as income, expenses, and fixed asset purchases. Accurate accounting records make it straightforward to reconcile any tax form, including a 1099-K, with your financial books.

Segregation of expenses: Scrutinize business accounts to verify the absence of personal expenses. Repay the business for any identified expenses during this examination.

Generate expense reports. The presence of expense reports accompanied by supporting invoices and business credit card statements, along with corresponding invoices, will provide valid documentation for your deductions in case of an audit.

Planning for fixed assets: Comparing Section 179 or bonus depreciation expensing with traditional depreciation can be a valuable strategy. When opting for Section 179, it's crucial to ensure that qualified assets are put into service before the end of the year.

Optimizing business meals: Fifty percent of expenses incurred for business meals with clients or customers are tax-deductible. Keep essential receipts and documentation that clearly indicate the date, attendees, and business purpose for each meal.

Exploring charitable opportunities: Take a moment to consider any last-minute deductible charitable contributions, including the possibility of contributing long-term capital gain stocks.

Cell phone record examination: Scrutinize your telephone records to identify instances of qualified business use. While deducting a single landline from a home office can be challenging, documenting and deducting cell phone expenses for business purposes is feasible.

Inventory assessment: Evaluate your inventory for accuracy in counts, and eliminate obsolete or valueless products. Keep a record of the amounts considered obsolete or valueless for potential deduction purposes.

Receivables review: Prioritize collection efforts and assess your uncollectible accounts for potential write-offs.

Estimated tax payment review: Summarize your year-to-date estimated tax payments and compare them to your projected full-year earnings. Subsequently, make your 2023 fourth-quarter estimated tax payment by January 16, 2024.

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