Ending the Year Wisely
December has arrived and with it comes the holiday craze. We spend a lot of time and effort gift shopping and making social plans for the end of the year. Although this is an important part of our social and family lives, we must not forget to think about our business and monetary concerns as the year ends. The last month of the year is also crucial in setting us up for financial success in 2022. Now is the time for us to access our situation and make the best possible financial decisions for our future.
Assessing Our Situation
All of us have some sort of tax burden and responsibility. It is a necessary fact of life in American and we must all be willing to pay our fair share. That being said, none of us wants to pay more in taxes then we have to. Tax rules and regulations vary based on the state you live in. For example, Florida does not have a state income tax and that is why many people choose to move their residence prior to receiving a large pay day. For most of us and those who do not want to move from our homes, there are ways to reduce our tax burden. Taxes are often calculated based on net assets and how much money we have made in the prior year. A simple way to reduce our own tax burden is to reinvest in ourselves and our families. In order to successfully do this we must look at our situation now before 2021 officially ends.
Understanding What to Look at
We all have different incomes and many of us take payment from more than one job or organization. In order to understand how much money we might have to pay in tax we first must understand and calculate how much money we make. Based on the past 11 months we should all have an idea of how much income we will have to report to the IRS and there are ways to reduce this. Spending some access cash on retirement funds, home improvements, educational opportunities, and future investments are just some ways to reduce reporting earnings and reduce taxes. Many of these, and other, self-improvement options are tax deductible and if we can pay for some of them up front we can count them as a 2021 expense.
Business Expenses
For those of us who own small businesses showing a large profit drastically increases our tax responsibilities. If our business is successful and profitable enough, a goal we all wish to achieve, we could end up paying more in taxes then we want to. In order to avoid this, it is important to spend as much money as possible at the end of the year. This can be done in numerous ways. If there is only a small amount of profit to reduce, we can simply prepay some 2022 bills. This allows us to get a good start to 2022 by minimizing out financial burdens. If prepaying bills does not make a major dent in the profits you are trying to shed you can always reinvest in the company. Based on your business needs a complete upgrade of your computer system, office furniture, vehicle fleet, or building facilities might be justified. If you have enough extra cash on hand you can create the office of your dreams r get that fancy truck you have had your eyes on. Another great way to shed small business profits is to share the wealth by investing in your people. Paying a holiday bonus or investing more into your employee retirement funds is a great way to reduce reported income and increase employee morale all at the same time.
Have Fun
Work can be stressful and if you have used all the practical options to shed additional income it is okay to think outside the box. Having a company lunch or dinner event or even a full out holiday party is a great way to keep everyone happy and to shed some income at the same time. This event can be as large or as small as you wish and its costs can vary greatly. A simple lunch can be fun but a huge spectacle must attend party can take things up to the next level. If you had a real good year you can set it up as an open bar and even include top shelf drinks if you can afford it. It is important to be responsible and practical with your finances but if you have the ability to go crazy it is okay to as long as you do not go too far overboard.
The American Economy had a great 2021 year and many of us made more money than we normally would. It is important that we reinvest in our future and take some time to enjoy the good times because history has shown us they will not last forever. If we make good financial situations we can set ourselves up for successes for years to come and we can be prepared if the economy does slow down. So, spend a few days this December thinking about the future and take action before it is too late.