As 2023 winds down and we quickly approach year-end, here are some planning ideas to help you prepare for filing your upcoming business tax return.

What to prepare and review for this year-end

• Informational returns. Identify all vendors who require a 1099-MISC and a 1099-NEC. Obtain tax identification numbers (TINs) for each vendor if you have not already done so.
• Create expense reports. Having expense reports with supporting invoices and business credit card statements with corresponding invoices will help substantiate your deductions in the event of an audit.
• Cell phone record review. Review your telephone records for qualified business use. While expensing a single landline from a home office can be difficult to deduct, cell phone use can be documented and deducted for business purposes.
• Inventory review. Review your inventory for proper counts and remove obsolete or worthless products. You must also keep track of the obsolete and worthless amounts for a potential deduction.
• Review your receivables. Focus on collection activities and review your uncollectible accounts for possible write-offs.
• Review your estimated tax payments. Recap your year-to-date estimated tax payments and compare them to your full-year earnings forecast. Then, make your 2023 4th quarter estimated tax payment by January 16, 2024.
• Separation of expenses. Review business accounts to ensure personal expenses are not present. Reimburse the business for any expenses discovered during this review.

Other business tax planning considerations

• Be prepared to receive a Form 1099-K. You may receive a Form 1099-K from each payment processor from whom you receive $600 or more in payments. In addition to credit card companies and banks, payment processors can include Amazon, Etsy, PayPal, Venmo, and Apple Pay. You’ll need to include the 1099-K on your tax return.
• Categorize income and expenses. The best way to prepare for receiving a 1099-K is to organize your records by major categories of income, expenses, and fixed asset purchases. So, if your accounting records are accurate, any tax form, including a 1099-K, should be easy to tie into your books.
• Shifting income and expenses. Consider accelerating income or deferring earnings based on profit projections.
• Fixed asset planning. Section 179, or bonus depreciation expensing, versus traditional depreciation, is a great planning tool. If using Section 179, then the qualified assets must be placed in service before year-end.
• Leveraging business meals. Business meals with clients or customers are 50% deductible. Retain the necessary receipts and documentation that note when the meal occurred, who attended, and the business purpose on each receipt.
• Charitable opportunities. Consider any last-minute deductible charitable giving, including long-term capital gain stocks.

Next steps for business year-end tax planning

Contact our RRBB advisors for more information or if you have questions.