What should you do before the end of the year?

It’s always a valuable idea to meet with your accountant about a month before the end of your tax year. By this time, you have eleven months of data to show and can predict fairly accurately how much more income and expenses will occur in your last month. Now, as a business owner, you have a tad of flexibility to influence your net income for the year.

Looking at a Loss?
If you already show negative income, you can beat the bushes to get slow clients to pay up. You can hustle to churn out more invoices and maybe offer discounts for early payment. You also wouldn’t want to purchase anything more unless you absolutely need it this year. Most likely -- unless someone in your household shows a huge surplus of income -- your goal is to do whatever you can think of to show less of a loss.

You may be able to carry forward a loss with the hope it can help reduce future years' taxes. But the future is unknown, so do what you can now.

Too much profit?
On the other hand, if this year is a lot more profitable than last, you might want to do the opposite this month because that wonderful profit means you’ll pay more in taxes for this year, plus more in estimated tax for each quarterly payment throughout next year. You can’t put a stop to ongoing business or refuse to deposit new income you receive. But maybe this month you could relax and slow down your marketing efforts until next year. You can cut slow payers a little slack. You might even take this opportunity to take a vacation or hang out with your family.

But don’t make the call on your own -- talk to your tax pro. Chat about how you think next year will go compared to this. Looking at your numbers and the big picture for the future, your accountant may suggest now’s the time to change your form of business and synchronize the change to occur at the beginning of your new tax year. But if you don’t ask now, the well-timed opportunity will slip by.

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