Year End Tax Tips That Make Sense…and Dollars 2022
Every year at this time, tax experts and news organizations (non experts) come out with their year end tax tips for small business.
Unfortunately, end of year tax tips are mostly too late! But, in this post, I will show how crap the ones they put out are and then give you REAL tax tips that make sense…and dollars.
Year End Tax Tips from a random CPA:
- Prepay your expenses – Well, this can only be done for a cash based business. In addition, you may gain for 2022, but then you leave yourself short for 2023, which could (and probably will be) be a higher tax rate year. Net result =$0 or less.
- Stop billing your clients – This is, in effect, putting off income till the next year. Which is, again, a gamble on rates. Net result = $0 or less
- Buy Equipment and write it off 100% – Well, this prompts people to buy things they don’t really need just for a deduction. If you buy something for $1,000 and you are in the 40% rate, you only save $400 in taxes. Therefore, you have put out $600 you did not need to. Unfortunately, most people think they will get all the money back when experts say 100%. Net result – $0 or less.
Here are the tips from Kiplinger, a well “trusted” publication:
- Check your withholding – This is not a tax savings tip at all. All this is is a factor in how big or small your refund will be. I used to tell people I could guarantee you a $10,000 refund. I will just have you withhold $10,000 more! This is a joke tip. Net result $0
- Pay your 2023 bills now. Well, same story as #1 from a CPA. Net result =$0
- Contribute to a 529 plan – Well, once again, if you want to contribute, do it for the right reason and not just a small cash back. Usually less than 10%.
- Contribute to a retirement plan. – This is an oldie but goodie. If you take $600 that you may not have just to save about $120 max, that is not good cash flow management. Contribute to your retirement with funds you can afford and the small tax deduction is the icing on the cake!
Now, here are some tax tips for small business that makes sense…and dollars!
- For sole props (99% of you) – Pay your children a Christmas bonus! (they must be between 7-17 years old). This is done with money you have and transferred to your child’s account. You can then use that money to pay for anything you want. The child’s expenses, groceries, braces, anything! Let’s say that you pay your child $2,000 Christmas bonus. If you are self employed, you save the SE tax as well as the federal, state & local tax. Net result between $600 and $800 on the $2,000. Pay up to $12,000 per child! Click here for FREE download of all the rules.
- Maximize Auto Deduction – The IRS is paying 62.5 cents for the last half of 2022. If you did not keep track all year, go back and recreate your mileage log for 2022 and make sure you capture every mile! If you miss out of miles it cost you up to $600!
- Work on your bookkeeping – Interesting but I have so many people that say to me I’m sure I have more deductions but I am behind on my books and cannot find everything. Take an hour a day and work on this. You will be amazed at the items you have missed PLUS the IRS requires a set of books in order for you to get deductions! – Possible loss – $1,000’s as you may get your deductions disallowed!
- Firm up your home office – Yes! The home office is alive and well. Just don’t abuse it! Draw out the map of your house and then gather every expense that happen at your home! Down to Toilet paper and light bulbs. Ever since they basically took away house interest & real estate taxes, the only way to write a portion of that off is through your home office. – Potential savings $500-$700
- Stop counting Inventory – Biggest time waster is counting inventory. If you are on the cash basis (99% of you), you write off product when purchased. No inventory shown on your return. If you had inventory on last year’s tax, zero it out on this year! Based on the amount of amended returns I’ve done for inventory adjustments, the potential savings are $800-$2,000.
Like I said before, year end tax tips for small business are slim as most strategies should be started January 1st to get the full effect.
In order to get the best tax return ever CLICK HERE to get the Tax Reduction Online portal. Use code TAXTIPS to get $100 off through 12/31/2022.
Cheers
Steve
