As the calendar year swiftly comes to an end, it’s important for businesses to not just reflect on the year that was, but also start thinking about their financial goals for the coming year. Considering you will very soon begin the formal tax preparation process, having a good idea of your financial standing and goals is an important part of being able to take advantage of certain deductions and getting your taxes done as efficiently as possible.
With this in mind, here are a few year-end tax tips we have for business owners here in the U.S. Virgin Islands.
- Review all financial reports: The first step you take should be to carefully analyze all financial reports you have to determine how your business performed financially this year. This information will help you set more feasible goals for the coming year and ensure all your books are currently in good standing. Have whoever does your bookkeeping or accounting run all relevant reports, and have a one-on-one meeting with them to go through these reports and analyze what they mean for your company.
- Make purchases: If your business has any equipment or inventory needs, the end of the year is a good time to make those purchases because it will help you qualify for more business expense deductions on your taxes.
- Income deferral: Keep in mind that any income you accrue up through December 31 will count toward income for this year. If you earn income now but are not paid for it until after January 1, that income will not count on this year’s taxes. Therefore, if you want to put off some of your tax liability, you can try to defer some payments until after the first of the year. Ask your accountant for advice about this and whether it makes sense given your business’s financial situation.
- Make charitable contributions: Similar to how making purchases before the end of the year can give you more deduction options, so too can contributing to charity. The holiday season is a great time to make these contributions as it is, but it will also allow you to take advantage of some charitable contribution deductions on your taxes. You can donate just about any type of asset you have, not just money, and still claim a deduction based on the fair market value of what you donate.
- Get ahead for next year: If there are some things that come up in your year-end financial analyses that you want to avoid or prepare yourself for next year, be sure to note those now and work early in the coming year on processes and strategies you can put in place to make next year’s tax preparation go that much smoother.
For more information about steps you should take before the end of the year to prepare for tax season, contact a team of corporate planning attorneys in the U.S. Virgin Islands.
Adam N. Marinelli is an Associate Attorney in the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.