By Nick Strain, CFP®, CPWA®, AIF®, Senior Wealth Advisor as featured in Small Business Adviser

This four-part checklist will put you in the habit of looking ahead and maximizing your tax benefits.

One of the most common questions I get asked by my small business owner clients is how they can save money on their taxes.

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Good planning and preparation will help decrease the potential for any big surprises when you file your taxes.

This four-part checklist will put you in the habit of looking ahead and maximizing your tax benefits. This should be done on an annual basis, near year-end.

  1. Review income/expenses and compare to last year

Reviewing your year-to-date income and expense report and comparing it with the same period as last year will help to show trends or changes in categories, especially this year as inflation has had a big impact on businesses. This review will help you determine if you need to make changes in your business strategy, pricing, cost management, employee benefits and your own finances as an owner.

  1. Meet with your financial advisor

It is highly recommended to meet with your 401(k) and retirement plan advisors annually to review the final benefit calculation from last year and project benefits for the current year to confirm that it fits within your company budget. You should also look at options to make changes either to decrease or increase benefits based on this analysis. As an owner, you can ask for calculations that show how to maximize your 401(k) and profit-sharing contributions and how much you will need to contribute for your employees as part of ERISA calculations and rules.

  1. Meet with your CPA

Schedule a meeting with your CPA to review year-to-date income/expenses and project income/expenses through the end of the year to determine if you should be making any strategic changes before year end. Ask your CPA if any your business is eligible for any tax credits such as the Employee Retention tax credit. California pass-through companies can ask your CPA if you are eligible for AB 150. This allows California business owners to pay state taxes through their business, which qualifies as a business expense and thus reduces their federal taxable income and taxes.

  1. Prioritize your own planning

Don’t forget about your personal finances and prioritize reviewing year-to-date performance, realized gains/losses, and unrealized gains/losses to determine if tax loss harvesting could be effective for you and ask if there are any additional changes you should make based on your business and personal situation and goals.

Regardless of your situation, it is critical to review where you are financially and ask your CPA, financial advisor and 401(k) providers to look at your situation and provide recommendations.

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These professionals typically work with dozens to hundreds of clients so they should have insights if they understand how your income and expenses have changed and your goals.

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Tax laws and retirement plan laws and rules change annually, so it’s always good to get guidance from your trusted advisors.

Going through a year-end tax checklist and meeting with your advisors may not yield results every meeting, but it’s a good practice. This habit helps prepare you and your advisor team to make important decisions when your business is going through a change or when you are planning to make a change in your personal life. Your professional team can help provide options for you to consider that typically have a cost benefit analysis and this process will help you decide what options is best for you.

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