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Small business owners: do a mid-year review of taxes and finances

Small business owners: do a mid-year review of taxes and finances

As a small business owner wanting to make sure your business is on track for success, it is important to conduct a mid-year review of your finances. Yes, a nice warm-weather vacation away from work may be more tempting than reviewing financial spreadsheets, but it’s important to check your progress half-way through so you can avoid potential trouble down the road. A “check-up” halfway through the year, especially as it relates to your taxes, can ensure your business is on target to meet its year-end goals. As you conduct your financial check-up, consider the following advice.


Do

Do review your overall choice of business entities

For those just starting a business at the mid-year mark, you should take time to review the most fitting entity type, especially from a liability or tax standpoint. There are quite a few options, including sole proprietorship, partnership, C corporation, subchapter S corporation and LLC. Each type of business has their advantages and disadvantages. Although it is best to choose the right entity from the start, be sure to assess the rewards and shortcomings, even if you currently operate a business. If there is a different entity type that will equal better financial results for your business, make the necessary change.

Do assess your health coverage plans

Health insurance has become a hot topic of conversation amongst small businesses—and for good reason. If you are a small business owner, review your company’s health coverage plans and compare costs. It may be beneficial and cost effective to buy health insurance under a small business plan, rather than individually. Compare different health insurance plans to uncover better premium rates for your business. Also, if you are a small business owner that has fewer than 25 employees, and you offer health insurance to your employees, you may qualify for the small business healthcare tax credit.

Do get everything organized

Six-months worth of business expenses, deductions, and other tax information is easier to organize twice a year, than 12-months worth of that at the end of the year—right before taxes are due. Getting everything in order half-way through the year will not only make tax preparations twice as easy, but will also help you financially prepare for the next six months when it comes to profit projections, business purchases to maximize tax deductions, and more.

Do maximize tax deductions for capital investments and expenditures

Take a look at the equipment you have purchased for business purposes, as well as the improvements you have made to your facility. You may be overlooking key tax benefits available through depreciation deductions.


Don't

Do not forget about your personal financial goals

If you are a small business owner, don’t just think about your business goals—keep your own personal financial goals at the forefront. Discuss these goals with your financial advisor, as they are the best resource to help you achieve them. Be sure you are maximizing on your own saving opportunities, which can be done through retirement planning, profit sharing plans, simplified employee pension plans and more. Saving now will help secure a comfortable retirement.

Do not wait to take care of your tax filing responsibilities

If your business needed more time to file its taxes, and you filed for an extension, don’t procrastinate. Although corporations and partnerships have up until September 15 to file, utilize the summertime to carefully and properly prepare your return. You don’t want to wait until Labor Day and rush through the filing process. The more time you spend on your return, the better your return will be. And, once your business files, take the time to review your return. Are there adjustments that need to be made? If so, make the adjustments now to maximize the benefits of next year’s return.

Do not postpone meeting with a tax preparer

Although tax season may seem far away, schedule a meeting with your tax preparer. He or she can help review your current tax reporting and recommend any necessary changes. In addition, your tax preparer can identify and recognize appropriate opportunities to defer income recognition and accelerate deductions to help reduce taxes through proper tax planning.

Do not neglect a check-up even if you miss the mid-year mark

A check-up at six months is best, but depending on how things go and who you have to help you, it’s easy to miss the mid-year mark and skip the check-up. Even if you miss it and you are finally able to check in on everything at eight months, still do it. Work with a financial advisor and make sure everything is in order. It will make your life far easier than if you wait to finally check in only when taxes are about due.


Summary
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A mid-year review of your business’s finances will not only help your stress levels at year end, it may also increase your company’s cash flow. Think about it. Who doesn’t like receiving a check in the mail from the IRS? Take the time to look at those documents and make necessary adjustments to help your business meet its goals. One thing is for certain—you won’t regret it.


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Edward RigbyTax Expert and Principal

Edward Rigby has 19 years of professional tax experience and has served as the lead tax advisor for leading companies in the pharmaceutical, orthopedics manufacturing and financial services industries. Rigby specializes in advising clients on me...

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