By Chris Heisten, CRPC®, CFP®, CSRIC®

With the year’s end drawing closer and the holiday season upon us, small business owners are at a crucial moment to evaluate their business and financial status. Though the holiday spirit is in the air, making time to give due attention to your finances allows you to end the year with a feeling of confidence knowing your ducks are in order. 

This comprehensive end-of-year checklist for small business owners can be your guide to prevent any part of your plan being neglected as the year wraps up. It acts as a blueprint for safeguarding your business’s financial well-being, enabling you to reduce your tax liabilities and enter 2024 with a strong start.

1. Review IRS Elections (Especially if You Had a Net Operating Loss)

If you had a net operating loss (NOL) this year, double-check your IRS elections to ensure you made the correct ones. This is one of the biggest issues our CPAs see when they help small business owners file their taxes. 

All these decisions play a role in how much money your business may owe in taxes. Talk with a CPA or financial professional about which elections may be right for you.  

Additionally, how you structure your small business can make all the difference in the world when it comes to taxes. A tax professional can help you decide which entity type is the best for your business and help you apply before the deadline hits. 

For example, let’s say you found out you could save more in taxes by structuring your business as an S corporation instead of an LLC. If you’re a new business, you have two months and 15 days from the day you file your articles of formation to file your S corp elections. So, if you filed your articles of formation on March 1, you have until May 16 to file your S corp election for it to take effect that same tax year. 

2. Review Your Deductions

One essential aspect of your end-of-the-year checklist as a small business owner is reviewing your deductions. This involves assessing your business expenses and identifying potential deductions that can help reduce your tax liability. Keep in mind that tax laws and regulations can change, so staying up-to-date with the latest rules is crucial. 

There are several deductions available for basic business expenses and these can help reduce your taxable income significantly. Some common examples of business expenses include:

• Advertising
• Legal and professional fees
• Office expenses, including costs related to the business use of your home
• Business use of your vehicle
• Continuing professional education
• Memberships to professional organizations 

Tax-deductible business expenses need to be ordinary and necessary to operate your business. Consult your tax professional for more details on qualified business expenses. 

3. Review Depreciation 

New depreciation rules have come into effect in recent years due to the Tax Cuts and Jobs Act (TCJA). These changes allow you to write off most depreciable assets in the year they’re placed into service, according to the IRS. 

Common items you can write off for depreciation include computers, equipment, machinery, cell phones, buildings, office furniture, and vehicles, as well as intangible items like copyrights.

Make sure you keep a list of everything that counts as a depreciable expense. Doing so will help you lower your business’s taxable income.

4. Check Eligibility for Company Retirement Plans

There are several different tax-advantaged retirement plans available to small business owners, including the solo 401(k), the SEP IRA, and the SIMPLE IRA. A solo 401(k) is designed for businesses with only one employee, the business owner, whereas SEPs and SIMPLEs can be used for businesses with more employees, though SIMPLE IRAs are capped at 100 employees.

According to the IRS, an employee can participate in a SEP IRA if they:

• Are at least 21
• Have worked for the employer in at least 3 of the last 5 years
• Received at least $750 in 2022

Business owners can choose to be less restrictive than this and allow other employees to participate in a SEP, but you can’t be more restrictive than these IRS rules allow.

Review your SEP IRA eligibility requirements to ensure employees can participate in the program if you want them to. 

Choosing to add an employer-sponsored retirement plan to your company can be a great way to take advantage of tax credits, including those for setting up a new plan and auto-enrolling employees. You may also be eligible for additional tax deductions by making qualified employer contributions on behalf of your employees. It’s important to review your options with a qualified financial professional before making a decision on a retirement plan as each plan type comes with its own unique benefits and drawbacks. 

5. Review New Due Dates & Filing Methods for 1099s

A new rule that began in 2020 states any freelancers or contract workers who earned more than $600 from your company will receive Form 1099-NEC instead of 1099-MISC. NEC stands for “non-employment compensation”—and it’s only used for reporting independent contractor income. 

1099-NEC forms are due on January 31. If this day falls on a weekend, they’re due the following business day.

We Are Here to Help

At Heisten Financial, we’re experienced in supporting small business owners in building, safeguarding, and enjoying their wealth for the long haul. If you’re looking for help addressing any financial loose ends before the year wraps up, we’re here to provide guidance. We collaborate closely with our network of CPAs to make sure you receive seamless financial advisory services, including tax planning and cash flow management. Partner with us to establish a customized financial strategy by emailing jami@heistenfinancial.com or calling 907.222.6270 to kick-start the process.

About Chris

Chris Heisten is President and Founder of Heisten Financial LLC, a fee-based boutique financial planning firm with the focus of giving clients back their time so they can spend it doing what’s most important to them. Acting as a true fiduciary for his clients, Chris aims to solve their financial pain points and move them toward financial freedom. In the financial industry since 2007, Chris partners with business owners and oil workers on their journey through life, striving to instill calmness and a sense of direction as he simplifies the complex. He loves nothing more than seeing clients experience relief when they achieve what they thought was impossible.

Chris graduated from the University of Maine, where he played hockey on a scholarship, and retired from professional hockey in 2007. In the community, he remains engaged serving as a youth hockey coach. Chris holds the CERTIFIED FINANCIAL PLANNER™, Chartered Retirement Planning Counselor℠, and Chartered SRI Counselor™ designations. Outside of the office, he enjoys trying new food and wine, reading, traveling, playing golf and hockey, fat tire biking, and donating to local charities. His passions include being a husband and dad, lake life with the family, watching his son and daughter play sports, and spending time with his wife. To learn more about Chris, connect with him on LinkedIn.