During the holiday season, it’s all too easy to focus on sales to customers (for many businesses this is the peak selling season) and spending time with family and friends. However, taking some time to address certain business matters can help make 2019 an even better year and help you start the new year off right. In the final days of December, here are some actions that can help you comply with the law, obtain tax benefits, and position yourself for 2020.
1. Pay year-end bonuses. For many companies, 2019 has been a boom year, and sharing success with employees can be expressed by paying year-end bonuses. Employees receiving them may wish to have additional withholding taken (they have to submit a new Form W-4 to request that a flat amount be withheld from the final paycheck).
2. Set compensation for the coming year. What are you planning to pay your employees (and yourself if you are a shareholder-employee of your corporation)? When fixing compensation, take into account the cost of employment taxes. Keep in mind that the Social Security wage base for 2020 is $137,700, which will cost the company more in FICA for those earning more than the 2019 wage base of $132,900.
3. Set employee benefit programs for the coming year. Are you going to offer medical coverage? A retirement plan? Adoption assistance? Transportation benefits? Decide now if you haven’t already done so. Keep some new rules for 2020 in mind:
- New health reimbursement arrangement options for medical coverage
- New limits on contributions to 401(k) and other retirement plans
- New limits for adoption assistance, medical flexible spending accounts, and transportation benefits
4. Make last minute purchases. Need to upgrade equipment or add to what you have? Buying items—from heavy machinery to tablets and smartphones—and placing them in service before the end of the year gives you the equipment you need to run your business better while entitling you to write off the cost on your tax return. This is so even if you finance the purchase in whole or in part.
5. Review inventory. As the holiday season concludes, look over what you have on hand. You may want to conduct a physical inventory to check for “shrinkage” (stolen items) and review what items may need to be disposed of through a big sale to customers or a remainder company (to bring in some revenue), donations to charity (for a tax deduction), or simply discarded (and effectively written off).
6. Make charitable contributions. Tis the season to be generous. Keep in mind that owners of pass-through entities deduct their share of the business’s charitable contributions on their personal income tax returns if they itemize deductions.
7. Hold your annual board meeting. If you are incorporated, state law usually requires that you hold an annual board meeting (even if you’re the sole owner). At this meeting, you need to elect officers and directors; check state law for determining which positions must be filled and who can fill them. You also want to take certain actions, such as setting up an accountable plan to reimburse employee business expenses on a tax-free basis for employees.
8. Meet with your CPA. If you haven’t yet discussed your 2019 taxes, as well as planning ahead for 2020, don’t delay the conversation. There are actions you can still take before the end of the year to favorable impact your tax bill. If you’re an owner of a pass-through entity and pay tax on your share of business profits on your personal income tax return, the final installment of your 2019 estimated taxes is due on January 15, 2020. Make adjustments as needed to avoid any underpayment penalties.
9. Prep for law changes. There are numerous federal, state, and local law changes you’ll need to adjust to after 2019. Some examples:
- New federal overtime rules
- New state and local minimum wage rates, which apply if higher than the federal rate
- New federal and state income tax rules
10. Get ready to update the “date.” Check for things that show a date…your website’s copyright, your invoices…and be sure to change the year to 2020 on January 1.
Pay attention to the little things that need to be done before the end of the year. They can add up to great success.