End-of-Year Checklist for Small Business Owners

As the end of the year approaches, it’s time to take stock and organize your business finances. You do this so next year begins smoothly. That’s why we’ve created this end-of-year checklist for small business owners. We provide thoughtful fiduciary advice for the care, guidance, and course corrections to manage wealth, plans, and goals with purpose for your business. Going through our checklist will help you minimize your tax burden and start 2024 off right.

Review IRS Elections

If you’ll have a net operating loss (NOL) this year, double-check your IRS elections to ensure you made the correct selection. This is one of the biggest issues some CPAs note seeing when they help small business owners file their taxes.

These decisions play a role in how much money your business may owe in taxes. Talk with your CPA or financial professional about which elections may be right for you.

Additionally, how you structure your small business can make all the difference in the world when it comes to taxes. A tax professional can help you decide which entity type is the best for your business and help you apply before the deadline.

Review Deductions

As a reminder, you can no longer write off up to $300 in cash donations from your individual tax return if you take the standard deduction. And itemized charitable deductions are once again capped at 60% of your adjusted gross income for cash donations made. If you were planning to take charitable deductions in 2023, be sure to review them carefully to make sure they meet the requirements.

There are still deductions available for basic business expenses. The deductions can help reduce your taxable income significantly. Some common examples of business expenses include:

  • Retirement Plan Contributions
  • Advertising
  • Legal and professional fees
  • Office expenses, including costs related to the business use of your home
  • Business use of your vehicle
  • Continuing professional education
  • Memberships to professional organizations

Tax-deductible business expenses need to be ordinary and necessary to operate your business. Consult your tax professional for more details on qualified business expenses.

Review Depreciation

Depreciation rules went into effect due to the Tax Cuts and Jobs Act (TCJA). The changes allow you to write off most depreciable assets “in the year they’re placed into service,” according to the IRS.

Common items you can write off for depreciation include computers, equipment, machinery, cell phones, buildings, office furniture, and vehicles, as well as intangible items like copyrights.

Make sure you keep a list of everything that counts as a depreciable expense. Doing so will help you lower your business’s taxable income.

Review Your Retirement Plan Design

Certain states are requiring businesses to offer retirement plans to their employees. The good news is there are several different tax-advantaged retirement plans available to small business owners. The plans include 401(k)s, the SEP IRA, and the SIMPLE IRA. You’ll want to choose the plan that’s right for you and your business.

Each type of plan has different rules. To learn more about which plan is right for your business contact us.

Review Due Dates & Filing Methods for 1099s

Beginning in 2020, any freelancers or contract workers who earned more than $600 from your company will receive Form 1099-NEC instead of 1099-MISC. NEC stands for “non-employment compensation”—and it’s only used for reporting independent contractor income. 1099-NEC forms are due on January 31.

Our Planning, Your Future

Life gets busy and complicated at times, and it’s easy to lose sight of why you do what you do. Hopefully, our checklist for small business owners helps alleviate stress. At Sentinel Financial Planning, we identify and integrate asset management and proactive thoughtful planning ahead of tax events. If you’d like to learn more about our process, reach out to us at (443) 906-1565 or schedule an appointment today.

About Mark

Mark Humphries, CFP® is the owner and financial advisor at Sentinel Financial Planning, a boutique, veteran-owned and operated investment management and financial planning firm. Mark focuses on helping federal government employees, military members, and business owners manage their investments and plan for retirement. As a former military service member and federal employee with over 10 years in the financial industry, he is familiar with the Federal Employee Retirement System (FERS) and the Thrift Savings Plan (TSP) and is uniquely qualified to serve his clientele.