[I’m so excited to share this aptly timed guest post for you with tons of tips on end of year financial planning! Dig in!]
Set Yourself Up For Financial Success By Making The Most Of These End-of-Year Tax Filing Tips
The end of the year is almost here and if you’ve got a side hustle or own your own business, it’s time to start thinking about some last minute ways to wrap up 2017 on a positive financial note! The best place to start is by doing a quick “look back” at the year to get a feel for how you did financially. Are you on track to meet your goals? Did you do better or worse than you thought you would? Once you do that, it’s time to start looking at some end-of-the-year ways to make sure that you end 2017 with a bang!
End-of-Year Tax Filing Tip #1 – Hire A Professional To Handle Your Return
We love to DIY things. In fact, being resourceful is probably one of the reasons you decided to start a side hustle or own your own business. However, one thing you should never try to DIY are your taxes, especially if you have a side hustle or own a business. Uncle Sam takes this kind of thing very serious and unfortunately, our tax code is just too complex for us to completely understand on our own. As you get ready to make some last-minute financial moves for the year, hire a professional to make sure they are the right moves for you. There are so many factors that can determine whether something is the right or wrong move, so gain a little peace of mind by having a professional business accountant look things over for you. If you are on the east coast, we have a few recommendations to get you started: RJB Tax Associates or Teasley Ayers CPAs.
End-of-Year Tax Filing Tip #2 – Purchase Equipment That You Might Need For 2018 Now
A great end-of-year tax move to make as we close out 2017 is to maximize your deductions and make large purchases before the end of the year. While this is a common practice, there’s something you need to know before you go out and buy that new $5,000 big-ticket item: It’s not a $1 for $1 tradeoff! Every dollar that you maximize your deductions by does not equal $1 in tax savings. To see a positive impact, you need to understand what tax bracket you are currently in and whether or not these purchases will bump you to another tax bracket. So, instead of buying just to buy, be more practical. Look at your goals and plans for 2018. Is there something that your side hustle or business needs or could really benefit from? If so, then the best time to make that purchase is now! In addition, a practical benefit to making a big purchase before the new year is that it gives you time to integrate this new product, software, or piece of equipment into your business. That means 2018 is all about producing results, not the learning curve!
End-of-Year Tax Filing Tip #3 – Put Money Into Your Retirement Account
As an avid follower of Burke Does, you probably already understand the importance of having a retirement account—no matter how far in the future it may seem. Now that the end of the year is approaching, it’s the perfect time to take a look at how much you’ve been contributing to your retirement accounts for 2017. When we do this, we want to make sure that our short-term and long-term financial goals are on track! First, we always suggest maximizing your after-tax (Roth) contributions before making pre-tax (Traditional) contributions. Focusing on after-tax contributions means that the money you set aside is growing tax-free, and you’ll be able to make withdrawals (when you finally reach retirement age) without the burden of paying taxes—and that’s our long-term financial goal. Currently, the contribution limit for a Roth IRA is $5,500 and $18,000 for a Roth 401k. As you begin to make one last contribution for the year, keep these limits in mind. If you’ve maxed out your Roth contributions, make the rest of your contribution in pre-tax contributions! The money that you contribute pre-tax helps to lower your taxable income for the year—and that’s our short-term financial goal.
End-of-Year Tax Filing Tip #4 – Do An Audit of Your Current Pricing Structure
The end of the year is the best time to evaluate your pricing structure and raise your prices. Another thing to be aware of as we begin our evaluation is the simple fact that your expenses for 2018 will likely increase. Do our prices need to offset that cost increase? While you shouldn’t feel compelled to increase your prices or fees every year, doing a yearly audit ensures that your compensation accurately reflects your experience and that you are getting paid what you’re worth!
As you begin to explore the idea or raising your prices or fees, here are a few things to consider:
- Has your work and experience over the past year given you more credibility and justification for a rate increase?
- What are your counterparts making?
- What can the market stand?
- Did you add any certifications or maybe a language to your resume?
Now, let’s set aside all of the fancy maneuvers and side-steps for a minute and go back to our original plan. Take a few days to really understand how you performed financially for 2017. Identify the areas you exceeded yourself in and celebrate those. Remain consistent in those things and put an added focus on the things that you need to improve on. Then, consider all of the end-of-year tax filing moves we just covered and pinpoint the ones you think you’d benefit from. Then, before you decide to engage in any of these aggressive end-of-the-year tax moves, talk to a professional so that you can ensure you are engaging in only the most productive moves for your situation. Doing so, you’ll be able to end 2017 with a bang and set yourself up for a rockstar 2018!
Ray Borges is the founder and president of RJB Tax Associates. For over 15 years, RJB Tax Associates has been providing tax and accounting services that meet the specific needs of each of our clients. We partner with both individuals and businesses to offer unmatched professional services and financial acumen.