Adding another item to your to-do list before the end of the year may be the last thing that you want to think about, unless of course it is going to positively impact your wallet or your mind.
The last few years have been anything but normal, and based on that we have identified three to-dos for you to consider as we close in on 2022. If you are one of the lucky few who have already addressed each of these areas, congratulations, you are doing a great job, and all the best to you and your company for a strong close to 2021.
1. Review your business’s estimated quarterly income tax payments!
Contact your income tax professional to run a forecast of your year-end revenue and expenses. What is your estimated net income going to look like by Dec. 31, 2021, compared with 2020? Do you have a wide gap when comparing your estimated income tax payments against your estimated income taxes due?
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2020 was an outlier year — for some company’s revenues were down since then, but many other businesses saw their revenues increase. In the illustration below for “ABC Corp.,” you will see that ABC has had a large increase in net income for their business in 2021 vs. 2020. ABC has not adjusted their estimated quarterly income tax payments throughout the year — which could lead to a nasty tax surprise.
To-do #1: Contact your income tax professional to compare your estimated quarterly tax payments against your estimated income taxes due. Are you prepared?
2. Determine whether you are maximizing your retirement plan deductions.
Should you consider revising your retirement plan for your company? Prior to selecting a retirement plan, seek the guidance of a qualified professional, as each plan has its own requirements and protocol to follow.
Key items, such as when you can make changes to your plans, plan limits, maximums and calendar year deadlines, all need to be taken into consideration prior to doing anything. Once you have completed your diligence, if you are looking for ways to offset net income with an income tax deduction, several retirement plans can be reviewed. Below, find the maximum contributions limits for 2021 on four common retirement plans, of course many others exist that may suit your needs:
*If you are 50 or older, you are allowed an additional retirement contribution that exceeds the statutory limit, known as the “catch-up” contribution.
** Includes profit sharing or money purchase pension plans.
To-do #2: Review your retirement plans. Are you contributing to the plan that is best for you and your company’s situation? Are you taking into consideration the maximum contribution limits in your planning?
3. Take time to reset and refocus.
Abraham Lincoln once said, “Give me six hours to chop a tree, and I will spend the first four sharpening the ax.” The past few years have been especially interesting, and our thinking has been stretched to accommodate the pandemic. The additional responsibilities, creative thinking and keeping our minds on business solutions have put strain on all of us.
Taking time to “sharpen your ax” will keep you fresh, on your game and solid with your decisions.
To-do #3: Perform a mental reset by asking yourself a few questions about your business:
- What did I learn from 2021? What worked? What didn’t?
- Is my vision “still” aligned with my priorities?
- What can I take from 2020 and 2021 to make 2022 my best year?
Although, to-dos are not typically something we get excited about, reconfirming the ideas above could save you time, money and reconfirm your focus and energy going into 2022.
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