Skip to content
Oak Capital Advisors
  • About Us
  • Our Services
    • Exit Planning
    • Tax Management
    • Retirement Planning
    • Investment Management
    • Insurance Planning
    • Estate Planning
  • Media
  • Podcast
  • Blog
  • Contact
  • Free Financial Independence Roadmap™
    Free Financial Independence Roadmap™
Brett Fellows, CFP®

About the Author

Brett Fellows, CFP® is the founder and president of Oak Capital Advisors in Charleston, South Carolina. As a small business owner and financial planner, Brett's expert insights help entrepreneurs successfully exit their businesses and plan for a financially secure retirement.

Popular Posts

5 Tips for a Smooth 2023 Tax Season

Emotional Investing Part 2: The Costs of Investing Emotionally

Emotional Investing Part 1: Why Investors Behave Irrationally

2022 Year-End Financial Planning Checklist

Episode 20: End-of-Year Tax Planning Tips for Small Business Owners

The Retiring Entrepreneur Podcast / By Brett Fellows / November 11, 2021 November 11, 2021
Contents hide
1 Look for Opportunities to Reduce Your 2021 Tax Bill
1.1 Tip #1: Review Your Business Structure
1.2 Tip #2: Assess Your Year-to-Date Financials
1.3 Tip #3: Consider Accelerating Planned Expenses for 2022
1.4 Tip #4: Open or Contribute to a Qualified Retirement Account
1.5 Tip #5: Contribute to Charity
1.6 Enjoy the Episode!

Look for Opportunities to Reduce Your 2021 Tax Bill

Financial planning may be the last thing on your mind as we approach the end of 2021. But before the holiday season sets in and we begin a new year with new rules, don’t forget to take advantage of the opportunity to reduce your 2021 tax bill. In this episode of The Retiring Entrepreneur Podcast, I’m sharing my year-end tax planning tips for small business owners.

If you’re a business owner, you know how challenging cash flow planning can be. The last thing you want to do is overpay the IRS or not have enough free cash flow to pay your year-end tax bill. These tips can help you avoid costly mistakes and potentially reduce your 2021 tax bill.

Tip #1: Review Your Business Structure

The corporate structure of your business can have a significant impact on your overall tax bill. And as your business and income grow, the best structure for your business may change. Whether you’re a sole proprietor, LLC, partnership, S-Corp, or C-Corp, now may be a good time to review how your business is set up—especially if you haven’t done so in a while.

A CPA, CERTIFIED FINANCIAL PLANNER™, or business attorney can help you determine if your business structure is still optimal from a tax planning perspective. While you may not need to do this every year, be sure to make it a priority if you plan to sell your business soon, as your business structure can significantly affect your net payout.

Tip #2: Assess Your Year-to-Date Financials

You may not know exactly what you’ll owe this year, but your year-to-date financials can give you a clue. Comparing your first three quarters’ financials with last year’s numbers will give you an idea of how your tax situation is shaping up based on what you paid in 2020. If you find out that you need to set aside more cash in preparation for Tax Day, it’s better to know sooner than later.

Tip #3: Consider Accelerating Planned Expenses for 2022

If you have extra free cash flow this year, you may want to consider upgrading or purchasing new equipment or initiating other business expenses before the end of the year. In most cases, you can deduct these expenses from your top-line revenue to reduce your taxable income.

Just remember: to be deductible, a business expense must be both ordinary and necessary, according to the IRS. Be sure to work with your CPA or financial planner to make sure you treat your business expenses correctly on your tax return.

Tip #4: Open or Contribute to a Qualified Retirement Account

Contributing to a qualified retirement account is a good way to offset your tax bill and supplement your income in retirement. If your business doesn’t offer its own retirement plan, there are a variety of options available to self-employed taxpayers to help you save on a tax-advantaged basis outside of the traditional 401k and IRA programs. Alternative retirement plans like a SEP IRA, for example, may allow you to contribute up to 25% of your income.

And don’t forget about health savings accounts if you qualify. Though not technically a retirement account, HSAs offer triple tax savings if you use the funds for eligible health care expenses. In addition, HSAs have no withdrawal requirements, so you can continue to grow your savings through retirement if you don’t need to access your funds before then.

Tip #5: Contribute to Charity

Finally, the holiday season can be a great time to increase your business’s charitable contributions for the year. Not to mention, your charitable gifts can help offset your 2021 taxable income. Remember, you don’t necessarily have to donate cash. You may also be able to donate equipment and other assets and claim a deduction for the fair market value on your tax return. Just be sure to get proper documentation and receipts for your records.

These are just a few ideas to help you reduce your 2021 tax bill before the end of the year. Your CPA or financial planner may be able to identify additional opportunities to minimize your taxes.

Enjoy the Episode!

Spotify
Google Podcasts
Did you find this information interesting? If so, please share it!
Post navigation
← Previous Post
Next Post →
The Ultimate Retirement Checklist for Small Business Owners & Entrepreneurs

The Ultimate Retirement Checklist

For Small Business Owners & Entrepreneurs

Find out what steps you can take today to prepare for a financially successful future.

download your free copy!

Ultimate Retirement Checklist

Contact Us

126 Seven Farms Drive, Suite 160
Daniel Island, SC 29492
Phone: (843) 284-0798

Linkedin Facebook Twitter

Navigation

  • About Us
  • Our Services
    • Exit Planning
    • Tax Management
    • Retirement Planning
    • Investment Management
    • Insurance Planning
    • Estate Planning
  • Media
  • Podcast
  • Blog
  • Contact
  • ADV Part 2 Brochures
  • Disclosure
  • Privacy Policy

Subscribe to our weekly email

© 2021 Oak Capital Advisors, LLC. All rights reserved​

Site designed and powered by Left Field Insights