A tax deadline is coming up on Sept. 15, and it offers small-business owners another chance to give their companies a financial checkup and to do some planning for the rest of 2003 and beyond.
Business owners who pay quarterly estimated taxes have an installment due on Sept. 15. Corporations that received a six-month extension of the March 15 deadline to file their tax returns must get those returns in.
Accountants suggest that business owners think about retirement plans, capital spending and their companies’ overall finances as they work toward meeting the deadlines. In the case of quarterly taxes, business owners should be sure that they are not underpaying and facing penalties when 2003 returns are filed in April.
Along with meeting the tax-filing deadline, corporations must be sure that they make their contributions to employee retirement plans for 2002. The six-month extension gave them more time to make those contributions, but the money must be in the accounts as of the 15th or it cannot be taken as a deduction for last year.
Individual owners don’t have a similar filing deadline pending. But Gordon Spoor, a certified public accountant with Spoor, Doyle & Associates in St. Petersburg, Fla., says “it’s time to decide whether they want to set up a retirement plan.”
Business owners interested in creating SIMPLE retirement plans (that’s short for Savings Incentive Match Plans for Employees) must have them up and running by Oct. 1. SIMPLEs can be individual retirement accounts or 401(k)s, and business owners should consider carefully which type of plan would be best for them. It’s a decision best made with the help of an accountant or other tax professional.
The good news is that creating a SIMPLE requires a minimum of tax-related paperwork — the Internal Revenue Service forms, 5304 or 5305, are not filed with the government but are used as notification to employees that they are covered by the plan.
Frank Lamanna, a certified public accountant with the firm Bean & Ison in Memphis, Tenn., said small businesses also should be looking at their expenses to determine if any spending planned for 2004 can be moved up to this year. Owners contemplating equipment purchases should consider whether it makes more sense to do them now, and take advantage of what is known as the Section 179 tax deduction.
This deduction, named for an Internal Revenue Code provision, allows small businesses to deduct upfront rather than amortizing the cost of equipment bought and put into service by Dec. 31. The tax cut signed into law earlier this year raised the deductible amount to $100,000.
Mr. Lamanna said this is also a good time for owners to start thinking about year-end bonuses, although they won’t be handed out for several months.
“They can go ahead and start planning and looking at that now, and try to get that tax burden down,” he said.
For business owners making their third estimated tax payment of the year, it is a chance to be sure that they are paying enough to avoid any penalties next spring. Mr. Spoor said accountants generally make for their clients what is called a safe estimate, which is based on the prior year’s tax liability. Without that estimate, business owners face those penalties.
It should be noted that some business owners don’t make quarterly payments, even if they are required to do so. Accountants say these owners are flirting with disaster — if they are not paying their taxes, it usually means their businesses are poorly run.
Even if you are meticulous about your payments, accountants say, the pre-Sept. 15 period is a good time for looking at your books and checking on your company’s overall financial health and making any necessary changes.
“Get the most accurate financial statement” on your business, Mr. Lamanna said.