With just two and one-half weeks left in the year, you can still make decisions that may lower your tax bill. Here are six for you to consider with input from your accountant:
1. Review your business books. You should be doing this on a regular basis, though I realize that most artists steer away from numbers! You need a clear picture of your earnings and expenses before you make any decisions that will affect your taxes or the life of your business. Talk to your accountant or bookkeeper about your current numbers and ask if you should be tracking something you aren’t.
2. Defer your income. Unless you expect to make considerably more income in 2012, you might want to defer income until after the first of the year. If this is the case, send out your invoices late this month so you won’t receive payment until January.
3. Increase your expenses. Stock up on business equipment and supplies before year end. Pay some of your bills early.
4. Contribute to your retirement plan. Review requirements for payments to your plan. If you don’t already have an individual 401(k), you may want to set up one before the end of the year.
5. Give. Charitable donations are tax deductible if you have a receipt. I recently made a couple of microloans through FINCA (www.finca.org) to women in Afghanistan in handcrafts businesses. You can also find microloan opportunities at kiva.org. Your very small loan will make a difference.
6. Invest in yourself. Since self-development is tax deductible, now is a good time to plan ahead to attend our first Creative Arts Business Summit. You’ll learn strategies you can use every day to grow your creative arts business and the investment is tax deductible.
These strategies apply differently to each business owner based on her particular situation. Since I’m not a financial professional, take time to discuss your strategy with your personal tax advisor. I had a discussion with mine last week and made a few adjustments that will make a difference.
Please share your thoughts on year end tax strategies below.