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A Year-End Tax Checklist

Follow these tips to take stock of your business's tax situation before the start of the New Year.
December 22, 2010
URL: http://www.entrepreneur.com/article/217777

Can you believe it's the end of the year already? Time zips by so quickly and then the holiday season is upon us. But before you ladle out the eggnog, remember this is your last chance to take action before your 2010 tax liability is carved in stone. Here's what you need to do:

1. Get your books in order. Take a close look at your bottom line. Discuss your profit and loss and the balance sheet with your bookkeeper to ensure accuracy. Compare this year's bottom line to last year's to see how your company has evolved.

2. Organize your receipts. If you've been collecting a shoebox full of receipts all year, start organizing them now. As an entrepreneur, part of taking your business seriously is to keep records that inform your financial position. Consider QuickBooks or other accounting software programs.

3. See your tax pro. This is the perfect time to discuss your potential tax liability. They're not in the midst of tax season's frantic pace and can carve out time to make recommendations for you. 

4. Create a 2010 file. This is best done at the beginning of the year. But if you haven't done it yet, set up a file for 2010 income-tax documents. Store receipts and documentation that pertain to taxable events, such as charitable donations, paid property tax bills, pictures of your home office, documentation for trade shows you've attended, etc.

5. Calculate your mileage. If you use your vehicle for business, record your odometer reading on December 31. Did you also record it on January 1, 2010? If not, try to find a repair receipt near the beginning of the year that includes the number. The Internal Revenue Service requires your total mileage, business mileage and commuting mileage, if any.

6. Consider your retirement funds. Open and make a contribution to a Health Savings Account (HSA) and/or a retirement plan. An HSA is an excellent way to get a full deduction for medical expenses. You must be in a high deductible health insurance plan to qualify. Your contributions to the HSA account are written off above the line just like your IRA contributions. For 2010, you may contribute $3,050 for self-coverage and $6,150 for family coverage.

7. Start thinking and planning for 2011. There were a number of tax law changes enacted in 2010 that may impact your business: