Tax season can be one of the most ominous times of the year for business owners. Even the most organized tax filers can be caught off guard when the proverbial smoke clears and they’re left with large and looming payouts.
Pool companies looking to decrease their tax burden can start planning and adjusting now to make next year’s tax filing less stressful.
Brian Quint, recently retired senior vice president for Aqua Quip in Seattle, says investing now for the next year can help businesses maximize deductions.
Quint, who has worked over four decades in the industry, first advises to evaluate what expenses can be prepaid before yearend, such as advertising, subscriptions, dues, software licenses, maintenance agreements, travel and utility bills. Paying ahead of time for these expenses can reduce tax liability.
He also suggests businesses plan to purchase or invest in capital projects like store remodels, vehicle purchases and other needed repairs or upgrades to any facilities. “Be very mindful of any opportunities to fully expense or take advantage of accelerated depreciation on capital expenses,” he says.
Sean DiMercurio, a certified public accountant at DiMercurio Advisors in Orlando, writes in a recent article from NerdWallet: “If you’re eating, sleeping, drinking or thinking about your business, chances are what you’re doing is tax-deductible.” According to DiMercurio, even a cup of coffee can be tax deductible under the right circumstances, and it can add up to big tax savings. NerdWallet advises businesses to be serious about bookkeeping by using accounting software and keeping receipts.
A Forbes article covering tax prep also emphasizes diligence in bookkeeping and receipt-organizing. “Filing taxes is a stressful process for even the most organized business owner. Please don’t try and file your taxes from a shoebox full of receipts,” Forbes advises. “Break up your accounting and bookkeeping throughout the year. This can be easily done with software like QuickBooks. For a more complicated business with many invoices and expenses, consider hiring a bookkeeper.”
The article also points out that procrastinating until tax time usually results in businesses taking a financial hit. “Missed tax deductions increase your taxable income and are essentially like throwing money away,” Forbes explains.
Running a tight bookkeeping ship will be essential for businesses that want to tap into Quint’s other suggestions.
“If you are the landlord, consider adjusting your rent payments,” Quint says. “At minimum, make sure you are paying market lease rates. If you have accounts receivable, make sure you have reserved or written off any questionable or delinquent accounts. Make sure your inventory value is correct.”
Quint advises those who have adjustments or write-offs to take them by year end to reconcile inventory and reduce net income. “With product costs increasing so quickly, confirm appropriate costs are assigned to your current inventory,” Quint says.
Salary or payment adjustments for all employees is another area of consideration. “All non-owner bonuses, commissions and incentives that are paid to employees by March 15 can be rolled back into the previous year, thus reducing year-end taxable profit,” Quint says. “Also consider nonprofits or charities that you can support or sponsor.”
David Ayoub, a CPA in Syracuse, New York, discusses the benefits of charitable donations in a recent TurboTax article. Ayoub suggests maximizing these contributions by donating appreciable stocks instead of money.
“Your business can deduct the current worth of the stock at the time of contributing, as opposed to what the stock was originally purchased (for),” Ayoub says. “For example, if you donate one share of a stock that you bought a year ago for $50 per share and that stock is now worth $100 per share, you can deduct $100 at tax time. This gives you a deduction of the $50 you paid for the share, plus the additional $50 that the share appreciated.”
Evaluating performance management is a final tax-saving avenue Quint says businesses should keep in mind for the rest of the year. “Look at your organization and see what areas of the business are underperforming or need help,” he says. “Many business owners are engaging efficiency or management consultants to help improve performance or processes in their businesses. This is an expense that can be deducted, thus reducing tax liability.”
