This may seem impossible – but come tomorrow, it will be December. This happens every year, too. Things are chugging along, feeling normal, and then suddenly, we embark on the rapid downhill to the end of the year. As we are now on that descent, though, there are some things one can think about when it comes to taxes before the calendar turns to 2023.
For business owners, if you are feeling comfortable and not worrying about how the bills will be paid through the rest of the year, there may be some expenses you can pay ahead of time that can lower your 2022 tax bill. And from the other side of the equation, you may want to think about if it is possible to delay receiving any income. These both work toward the overall equation that lower income plus higher expenses equals a reduced tax bill. Making sure you comfortably get to the end of the year is most important, but if you have some wiggle room, that is something to think about.
Those two pieces make up a large proportion of your bookkeeping, as well. The income half of this concept is easier to take care of usually. With minor regular bookkeeping, you can track what you were paid, for what you were paid, who paid you for it, and when it hit your bank account. It takes much more effort, however, to keep full track of expenses. Do you really know what was purchased with each Amazon transaction that is debited from your bank account? Can you properly justify that these are all business expenses and not for personal use?
There are more businesses who do not have this stuff fully documented now than those who do. This is one of those tasks that is not immediately necessary to accomplish for the business to keep working and therefore often gets left behind. Putting some effort into it now, though, can help decrease the tax season crunch when you try to get all this information in order under a deadline and can also help you make sure none are missed, thus again putting yourself in the best possible tax position.
Finally, when we come to this time of year, it is always a good moment to see if you can make any charitable donations. Sure, this potentially may come with tax implications that benefit you, but it is worth doing even beyond that. There is one type of feeling good that comes with having your finances in order, there is another type of feeling good that comes with helping fellow humans who need it. Please do not be afraid to embrace both.
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To ensure we don't make the folks at the IRS ornery, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.