EOY Business Spending in Lincoln, NE – 2018
If you’re a business owner, nothing sounds like nails on a chalkboard more than money going to waste. This is why end of year business spending is so important to be aware of and prepared for. November is a good time for businesses to look for ways to minimize their tax liability for the current tax year, otherwise known as money owed to the IRS when it’s time to file their taxes.
Basically, the more income you have left over after factoring in all eligible deductions, exemptions, and credits, the more money your business will owe in federal income tax. So, after analyzing your activity for the current year and discussing projections for the upcoming year, you’ll need to decide if it makes sense to spend any “extra” money before the end of the year to save on taxes.
No one wants to see local businesses succeed and make smart fiscal decisions more than our advocates at the Lincoln Chamber of Commerce. When we asked the Chamber to share some advice on the topic of EOY spending, they urged companies to consider the following:
- Goals—Look at goals from last year and future goals. Understanding business goals will help determine what year-end spending options are most practical and beneficial. Reference what worked and didn’t work in the previous year.
- Accrual basis vs. cash basis—A business’s tax reporting designation will impact its tax strategies. Under the accrual method, income is reported in the year it is earned and expenses are reported in the year they are incurred, whereas with the cash method, income and expenses are immediately reported.
- Be strategic—After ensuring all financial statements are up-to-date to get an accurate account of the business’ position, decide whether or not it’s smart to “spend money to save money.” Note that $1 spent does not equal $1 worth of tax saved. Expenditures correlate to deductions, and businesses should never spend money on things they don’t need just to increase deductions.
More to that last point, if there are purchases that need to be made on things that will improve operations, those are good investments to make earlier than planned in order to take the deduction in the current tax year. These options can include purchasing new equipment, paying expenses ahead of time, paying out bonuses, and setting up or putting money into a retirement plan. If the current year has higher income compared to what the business owner thinks it will be in the future years, then paying ahead can benefit a cash-basis business for the current year to offset the higher income. It really depends on the goals the business is trying to achieve.
“The end of year is crunch time and businesses are thinking about budgeting and improving processes,” adds Austin Peters with Levrack. “This includes inventory management and making growth projections. When it comes to end of the year business spending, look for opportunities to spend your extra budget on products or services that you can really utilize. In addition, to qualify as a decent tax write-off, purchase items that won’t lose their value quickly.
With these things in mind, now is the perfect time for your business to invest in Levrack, especially if you find yourself accumulating more stuff or hiring more people—maybe you’re even thinking of moving. Before hunting for more square feet at a different property, though, consider installing Levrack into a current space. I’ve worked with many businesses who have been amazed by how much room it frees up and, as a result, how much work flow improves.
Levrack storage units are made right here in the USA with industrial grade steel. They’ll hold over three tons of equipment, and, best of all, there’s no motorized parts or complex pieces to assemble. Our simple, hard-working design can withstand the wear and tear of any project you throw at it. It’s not something that depreciates like a car. Investing in Levrack is investing your company’s future. If a business is planning to relocate, they have the option of buying a Levrack unit now and we’ll move it in when they are ready.”
Speaking of business properties, the cost of renting space such as an office, storefront, or any other type of facility, is fully deductible. If a company anticipates expanding or relocating to a bigger space, investing in commercial real estate is considered when creating a tax strategy. Greenleaf Properties is a firm that has been serving businesses throughout the Lincoln area in the commercial real estate market for decades. We recommend contacting Greenleaf Properties so they can help your business start achieving its goals with strategies tailored to your specific needs and requirements.
Another outlet for additional business spending is technology. “Investment in technology not only increases productivity, it allows employees to work remotely if an expansion doesn’t make sense for a business that is outgrowing its current space,” points out Darren Lichty with Panology Tech Solutions. “In fact, it’s said that workers are 20% more productive when they get the chance to take on projects remotely. Technology makes remote work possible by allowing for real-time communication, easily sharing information, and immediate access to emails, files, and databases.
When the size and complexity of a business’s technology grows, so does the amount of time their staff spends maintaining it. Quite often the result is a mixture of versions and configurations. This happens to businesses large and small alike. You could spend your precious resources fighting this battle yourself, or you could entrust this to Panology.
We apply the insight we gain from an assessment, delivering a plan specific to your businesses needs and budget.”
“Now is the time to align business processes with effective technology,” Adam Walter with Virtual C agrees. “Considering that technology is heavily influencing virtually everything about how we run our businesses, leveraging your leftover dollars from 2018 in this area will yield returns in years to come. Virtual C can help businesses plan out their IT budget for 2019 so they can adjust accordingly when deciding how much to spend and how much to save. If your company operates on a cash basis for tax purposes and your profits seem likely to be higher in 2019 than in previous years, you may want to defer revenue during the last part of the year as a way of reducing your 2019 taxable income. At Virtual C, our mission is to be an unbiased partner to your organization. We want to help guide your technology strategy and implementation to keep your business optimal.”
In addition to product and service-related expenditures, small business owners have several options for tax-deductible, benefit programs such as education assistance and dependent care assistance, as well as contributions to employees’ qualified retirement plan accounts. Businesses may also get a tax credit to help defray the cost of starting certain retirement plans. Businesses generally have until the due date of their tax return in 2019 (for the 2018 tax year) to contribute funds to a retirement plan for the 2018 tax year, but some plans must be established before the end of the year to qualify for tax deduction in 2018. So, start thinking about retirement plans now and contact your financial advisor.
“We tend to look at year-end spending in a different light,” Bethany Arnold with Edward Jones acknowledges. “Lots of business owners think of tax deductions in the forms of new services, products, tools, or vehicles, but what about investing in yourself and your retirement? Sometimes spending money to save money is not a great option; it can be better to save.
As a financial advisor, I partner with business owners and their team members, including their CPA and/or lawyer, to ensure that the business entity is structured in the most tax efficient way. It’s important for me to find out from my clients what is important to them and what their goals and desires are for their business.
Through an established five-step process, we partner together to find out where the business owner is at today, where they see themselves in five, 10, 15+ years, and how they plan to get there. Its important to determine what retirement looks like for business owners and how they envision separating from their business in the future.
Once we have determined these things, I will partner with the business and their CPA to select the best retirement savings plan, whether it be a SEP, SIMPLE, ownerK, 401k, etc. Not every retirement plan is appropriate for all individuals, which is why it takes the teamwork of all players involved to find the best fit. I typically meet with business owners and their CPAs or attorney›s at the end of the year to determine how much money, if any, can be saved in retirement savings plan instead of purchasing unnecessary products, tools, or services.”
Bethany also shared some questions to think about when considering your business and retirement:
- What could derail you from reaching your retirement or business ownership goals?
- How do you feel about eventually retiring?
- How do you see yourself retiring?
- How much are you relying on the value of your business to fund your retirement?
- What happens to ownership if you die?
- Who becomes your co-owner if one of your co-owner dies?
- Do you have strong cash flows?
- Have you discussed the value of your business with your CPA or attorney?
The sooner you have an idea of your business’s general outlook for the tax year, the better prepared you are to prevent cash flow disruptions. This is why, like Bethany stressed, it›s good to talk to your accountant.
The CPAs and accounting experts at SP Group, P.C. can help businesses navigate through all the numbers. SP Group prefers to review a business’ tax situation before year-end to avoid any surprises for the taxpayer. Each client’s business is unique. We look at the client’s books for the year, what next year may look like, and their overall goals. We also look at their personal tax returns, in conjunction with the business returns. By examining both the business and the personal tax returns, we can recommend the best overall options for that client.
SP Group’s team of seasoned and knowledgeable professionals will make the end of year business spending experience simple and hassle-free. They do so by providing their clients with the service they deserve from a team that truly cares about them. We believe their firm does a really good job of working with clients by planning before year-end arrives.
On a final note, we’d like to encourage our readers to consider contributing to charity with the money their business has left over at the end of the year. Charitable giving a social responsibility that all businesses have, and it can also provide your business with a fair tax deduction.
EOY business spending is a matter of what to spend and what not to spend. Then, it becomes a matter of how much to spend and what to spend it on. So, before you start throwing your money at things left and right, it’s important to work closely with a professional to determine your strategy moving forward.