SB TAX Year-End Tax Moves for Colorado Small Business Owners
December is the last month you can still change this year's tax picture. Here are five moves Colorado small business owners commonly review before December 31, in plain English, with a link to the official rule for each. This is general planning information, not tax advice for your situation.
1. Plan your fourth-quarter estimated payment (due January 15)
If you pay estimated tax, the payment for September 1 through December 31 is due January 15 of the following year (IRS due dates). Colorado uses the same four dates for individual estimated payments, and a due date that lands on a weekend or holiday moves to the next business day (Colorado DOR). Looking at your year-to-date profit in December tells you whether that last payment should be bigger or smaller than the first three.
2. Time equipment purchases around Section 179
Section 179 lets a business elect to deduct the cost of qualifying equipment in the year it is placed in service, instead of spreading it over several years (IRS Publication 946). The key words are placed in service: equipment ordered in December but not set up and ready to use until January generally belongs to next year. Buy what the business actually needs. A deduction is only worth part of what you spend.
3. Review retirement contributions
Retirement plans for self-employed people, such as SEP IRAs, SIMPLE IRA plans and one-participant 401(k) plans, can lower taxable income while you save (IRS retirement plans for the self-employed). Each plan has its own rules for when it must be set up and when contributions are due, so compare them before December 31 rather than after.
4. Clean up your books
Every deduction needs a record behind it. The IRS expects you to keep records that support your income and expenses (IRS recordkeeping). Before year end, reconcile bank and credit card accounts, separate personal charges from business ones, and keep receipts for large purchases. Clean books make every other move on this list easier to judge, and our bookkeeping service can take this off your plate.
5. Get ready for 1099s
If you paid independent contractors this year, you may need to send Form 1099-NEC to them and file it with the IRS by January 31 (Form 1099-NEC, IRS instructions). Who must receive one, and the dollar threshold, are set in the current instructions, so check them for this year. Collect a Form W-9 from each contractor now, while it is easy to ask, so January is about filing, not chasing addresses.
Want a second set of eyes before December 31?
SB Tax & Accounting in Aurora works with small businesses across Colorado on tax preparation and year-round planning. A short call in December is usually enough to see which of these moves apply to you.
Book your free strategy call with SB Tax & Accounting.
Book a CallFrequently asked questions
When is the fourth-quarter estimated tax payment due?
For income earned September 1 through December 31, the IRS due date is January 15 of the following year. Colorado individual estimated payments use the same date. If it falls on a weekend or holiday, it moves to the next business day.
Does buying equipment in December lower this year's taxes?
It can, if the equipment qualifies and is placed in service before year end. IRS Publication 946 explains Section 179 and what placed in service means.
Which retirement plan is right for a small business owner?
It depends on your income, your employees and how much you want to put away. The IRS compares SEP, SIMPLE and 401(k) options for self-employed people, and a tax professional can help you choose.
Do I have to send a 1099 to every contractor?
Not always. It depends on how much you paid, how you paid and what kind of business the contractor is. The current Form 1099-NEC instructions set the rules.
Sources
This article is general information, not tax or legal advice. Rules change, so check the linked IRS and Colorado DOR pages or talk to a tax professional before acting.