We’re already halfway through the year. For business owners, this is a prime time to get things in order and make sure your tax strategy is still on track. June acts as a big checkpoint. Your quarterly taxes are likely paid, your books should be pretty clear, and you still have time to find ways to lower your tax bill for the year. We put together a simple plan to help you make smart moves now, before the rest of the year flies by. Whether you’re finishing up Q2 estimates or just looking for ways to pay less in taxes, this guide shows you what to focus on.
Key Takeaways
- Review your year-to-date income and expenses to see how they compare to your estimated tax payments. Adjust future payments if needed to avoid penalties.
- Look at any major purchases planned for the rest of the year. Timing them right could mean bigger tax deductions, especially with bonus depreciation rules.
- Check if your business structure is still the most tax-friendly option. Sometimes, changing how your business is set up can save you money.
- Think about your retirement savings. Calculate how much you can contribute and compare different plans to maximize your savings.
- Don’t forget state and local taxes. Make sure you’re aware of deadlines and any specific rules that apply to your business in different areas.
Your Mid-Year Tax Checkpoint Essentials
Alright, we’re halfway through the year! If you’re running a business, June is a really good time to pause and take stock. Think of it as a mid-year pit stop. You’ve likely just dealt with your second quarterly tax payment, your books should be looking pretty current, and importantly, you still have time to make some smart moves that could save you money come December. Let’s break down what you should be looking at right now.
Review Quarterly Tax Payments
Did you make your Q2 estimated tax payment on time? Good. Now, let’s make sure it was the right amount. It’s easy to get these wrong, especially if your income has been a bit unpredictable. You want to avoid any underpayment penalties from the IRS, right? A good rule of thumb is to check if you’ve met the ‘safe harbor’ requirements, which usually means paying at least 100% (or 110% if your adjusted gross income was over a certain amount last year) of what you paid in taxes last year. If your income has changed significantly this year, you’ll want to adjust your Q3 and Q4 payments accordingly. Don’t just guess; look at your year-to-date numbers and make a realistic projection for the rest of the year.
- Check Q2 payment accuracy: Did it match your projected income?
- Review safe harbor rules: Are you on track to meet them?
- Project Q3 & Q4 payments: Adjust based on current performance.
- Consider state and local payments: Don’t forget these too!
It’s tempting to just set it and forget it with estimated taxes, but a quick check now can save you a lot of headaches later. Think of it as preventative maintenance for your business finances.
Assess Year-to-Date Financial Performance
Pull up your profit and loss statement for the first six months. How does it compare to the same period last year? Are you seeing the growth you expected? Or maybe expenses are higher than you thought? This is your chance to really see where your business stands. If things are going better than planned, you might have more room for certain deductions or investments. If not, you can start thinking about ways to cut costs or boost sales in the second half of the year. It’s all about having a clear picture so you can make informed decisions.
Consult Your Tax Professional
Seriously, don’t wait until December to call your accountant or tax advisor. June is the perfect time for a mid-year strategy session. They can look at your current numbers, help you understand the implications of any business changes you’ve made, and advise on tax-saving opportunities you might have missed. They can also help you fine-tune those estimated tax payments and plan for any major purchases or investments. Getting professional advice now can make a huge difference in your year-end tax outcome.
Optimizing Your Business Structure
As the year rolls on, it’s a smart move to pause and look at how your business is set up. Sometimes, what worked perfectly when you started might not be the most efficient way to operate now, especially when taxes are involved. Think of this as a tune-up for your business’s legal and financial framework.
Evaluate Current Entity Efficiency
Your business entity type (like an LLC, S-Corp, or C-Corp) has a big impact on your taxes. What might have been the best choice a year or two ago could be costing you money now. For instance, if you’re an LLC, it’s worth checking if electing to be taxed as an S-Corp could save you money on self-employment taxes. This isn’t a one-time decision; as your business grows and changes, so should your entity’s tax strategy. It’s a good idea to review your business finances to see how your current structure is performing against your income and expenses.
Consider S-Corp Election Benefits
If you’re running a profitable business, especially as a sole proprietor or LLC, switching to an S-Corp election could be a game-changer. The main draw is the potential to save on self-employment taxes. Instead of paying those taxes on all your business profits, you can pay yourself a reasonable salary (subject to payroll taxes) and take the rest as distributions, which aren’t subject to self-employment tax. However, there are rules about what counts as a ‘reasonable salary,’ and you’ll have additional administrative tasks like running payroll. It’s a trade-off, and the mid-year point is perfect for crunching the numbers to see if it makes sense for your situation.
Review Owner Compensation Strategies
This ties directly into the S-Corp discussion, but it’s important even if you’re not considering that election. How you pay yourself – whether through salary, owner draws, or distributions – matters. For S-Corps, getting the salary-to-distribution ratio right is key to staying compliant and maximizing tax savings. If your business income has changed significantly this year, your current compensation strategy might need an update. It’s about finding that sweet spot where you’re fairly compensated, your business has enough cash flow, and your tax bill is as low as legally possible.
The mid-year mark is a prime opportunity to assess if your current business structure and how you’re compensated are still the most tax-advantageous. Making adjustments now, before the year closes, can prevent costly surprises and potentially lead to significant savings.
Smart Income and Expense Management
Alright, let’s talk about making your money work smarter for you, especially when it comes to taxes. The middle of the year is a fantastic time to really look at where your income is coming from and where your money is going. This is your chance to make adjustments that can save you a good chunk of change before December rolls around.
Identify Opportunities for Deductible Expenses
Think about all the things you spent money on for your business in the first half of the year. Did you buy new equipment? Pay for training? Travel for work? These are all potential deductions. It’s easy to let receipts pile up, but now’s the time to sort through them. Keep a close eye on things like:
- Office supplies and software
- Professional development courses or conferences
- Business travel and meals (within limits, of course)
- Home office expenses, if you qualify
Don’t forget about things like vehicle mileage. If you use your car for business, tracking those miles can add up to a nice deduction. Keeping a log, even a simple one on your phone, is key.
Strategize Income Deferral or Acceleration
This is where you get a bit strategic with timing. If you’re expecting your income to be higher next year, or if you’re in a lower tax bracket this year, you might consider deferring some income. This could mean delaying a large invoice until January or holding off on certain sales if possible. On the flip side, if you anticipate being in a higher tax bracket next year, you might look for ways to accelerate income now, perhaps by encouraging clients to pay early or making sales before year-end.
The goal here isn’t to cheat the system, but to use the flexibility you have to pay taxes when it’s most financially advantageous for you. It’s about smoothing out your tax burden over time.
Plan Major Asset Purchases
Thinking about buying a big piece of equipment, a vehicle, or other major assets for your business? Doing it before the end of the year can offer significant tax benefits. For instance, Section 179 of the tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. There are limits, of course, and rules about when the asset needs to be placed in service, but planning now means you can take advantage of these deductions sooner rather than later. It’s worth talking to your tax pro about what qualifies and the best timing for your specific situation.
Navigating State and Local Tax Rules
Hey there! As we hit the mid-year mark, it’s a good time to check in on how your business is doing with state and local taxes. These rules can get a bit tricky, and sometimes they don’t perfectly line up with federal tax laws. Ignoring them now could mean a bumpy ride later in the year.
Check State Conformity Adjustments
States often decide whether to follow federal tax law changes or go their own way. This means what’s deductible or how income is reported federally might be different for your state taxes. For example, some states might not allow the same bonus depreciation you get on your federal return, or they might have different rules for how they treat certain business expenses. It’s really important to know if your state has made any specific updates that affect your business. Staying on top of these differences helps you avoid unexpected tax bills and missed opportunities to save.
Verify State and Local Payment Deadlines
Just like federal estimated taxes, many states and even some cities require you to make tax payments throughout the year. Missing these deadlines can lead to penalties and interest, which nobody wants. It’s a good idea to have a clear list of all the states and localities where you do business and their specific payment due dates. A simple spreadsheet can work wonders here.
Here’s a quick look at typical payment schedules:
- Quarterly Payments: Many states follow a similar schedule to federal estimated taxes, with payments due around April 15, June 15, September 15, and January 15.
- Annual Filings: Some smaller businesses or those in specific situations might have annual filing requirements, but these often still have estimated payment components.
- Sales Tax: Don’t forget about sales tax! Depending on your sales volume, you might need to file and pay monthly, quarterly, or annually.
Coordinate Multi-State Compliance
If your business operates in more than one state, things can get complicated fast. You might have income tax obligations, sales tax nexus, or even payroll tax requirements in several places. The key here is to make sure you’re registered correctly in all the states where you have a presence and that your filings and payments are accurate for each one. It’s easy to overlook a small requirement in one state, but those can add up. Think of it like a puzzle – each piece needs to fit perfectly for the whole picture to be right.
Keeping your business compliant across multiple states requires careful tracking. What seems like a small detail in one jurisdiction could have bigger implications when combined with requirements in another. A little bit of attention now can save a lot of headaches later.
Boosting Your Retirement Savings
Summer’s here, and while it’s a great time for a break, it’s also a prime moment to check in on your future self – specifically, your retirement savings. Waiting until December to think about this can really limit your options, so let’s use this mid-year point to get ahead.
Calculate Maximum Retirement Contributions
Have you maxed out your retirement accounts for the year? It’s worth checking. For many plans, like a Solo 401(k) or a SEP IRA, there are specific limits on how much you and your employer (if you’re self-employed, that’s you too!) can contribute. Knowing these limits helps you plan effectively. For instance, if you’re self-employed, you might want to compare the benefits of a SEP IRA versus a Solo 401(k) to see which fits your situation best. Don’t leave free money on the table by not contributing enough.
Compare Retirement Plan Options
Are you using the best retirement plan for your needs? If you’re self-employed or a small business owner, options like a SEP IRA, Solo 401(k), or even a defined benefit plan could be on the table. Each has its own rules and contribution limits. For example:
- SEP IRA: Generally simpler to set up and administer, good for businesses with fluctuating profits.
- Solo 401(k): Allows for higher contribution limits, especially if you’re under 50, and offers loan provisions.
- Defined Benefit Plan: Can allow for very large contributions, often suitable for high-income individuals looking to significantly reduce taxable income.
It’s a good idea to review these periodically to make sure your chosen plan still aligns with your income and savings goals.
Plan Year-End Contributions
While you have until April 15th of next year to fund your retirement accounts for 2025, the accounts themselves need to be open before December 31st, 2025. This means now is the time to project your income for the rest of the year. If you anticipate a strong finish, you might want to increase your contributions. Conversely, if things look a bit slower, you can adjust accordingly. This proactive approach helps you make the most of tax-advantaged savings.
Thinking about retirement savings isn’t just about putting money away; it’s about smart tax planning. By understanding your contribution limits and comparing different plan types, you can make choices now that will benefit you financially for years to come. Don’t wait until the last minute to figure this out – your future self will appreciate the effort you put in today.
Ensuring Accurate Estimated Tax Payments
It’s the middle of the year, and if you’re running a business, now’s the time to really look at your tax situation. We’re past the second quarter payment deadline, and you’ve got a good chunk of the year’s financial activity to look at. This is your chance to make sure your estimated tax payments are on the right track so you don’t get hit with a big surprise, or worse, penalties, come December.
Verify Safe Harbor Requirements
Remember those safe harbor rules? They’re basically a way to avoid underpayment penalties. Generally, you need to pay at least 100% of your prior year’s tax liability, or 90% of your current year’s estimated tax liability, whichever is smaller. For many businesses, especially those with steady income, meeting these thresholds means you’re usually in the clear. But, if your income has changed significantly this year, you might need to dig a little deeper.
- Check your prior year’s tax return. How much did you owe then?
- Estimate your current year’s total tax. This is where things get interesting if your income is up or down.
- Compare. Are your total payments so far (including what you’ve already paid for Q1 and Q2) likely to meet the safe harbor amount by year-end?
The IRS is watching estimated payments more closely these days. If your income fluctuates a lot, just hitting the safe harbor might not be enough if your payments aren’t spread out correctly throughout the year. It’s better to be a little over than a little under.
Recalibrate Payments Based on Income Forecasts
Your initial tax estimate was probably based on what you thought the year would look like back in January. Well, a lot can happen in six months! Take a good look at your year-to-date income and expenses. Are you earning more or less than you expected? Are there any big projects coming up or expenses you didn’t anticipate?
Here’s a quick way to think about it:
- Review Year-to-Date Performance: Look at your profit and loss statements. How do actual numbers compare to your budget or projections?
- Update Your Forecast: Based on what you see now, what do you realistically expect for the rest of the year? Consider any known upcoming income or expenses.
- Recalculate Total Tax: Use your updated forecast to estimate your total tax liability for the entire year.
- Adjust Future Payments: Figure out how much more you need to pay in Q3 and Q4 to meet your recalculated total tax liability, while also keeping those safe harbor rules in mind.
Address Fluctuating Income Patterns
This is where things can get tricky. If your business has seasonal ups and downs, or if you’ve had a sudden surge or dip in business, your initial payment schedule might be way off. For example, if you had a fantastic Q1 and Q2, but expect Q3 and Q4 to be slower, you might have paid too little in the first half. Conversely, if you had a slow start but expect a busy holiday season, you might have overpaid initially.
- Seasonal Businesses: If your income is heavily weighted towards certain quarters, make sure your payments reflect that. You might need to pay more in your high-income quarters.
- Rapid Growth: If your business is growing fast, your income projections can become outdated quickly. Keep a close eye on revenue and adjust payments upward as needed.
- Unexpected Events: Did a major client leave, or did you land a huge contract? These events can significantly impact your income and require a payment adjustment.
Don’t wait until the end of the year to figure this out. A mid-year check-in gives you the time to make smart adjustments and keep the taxman happy.
Don’t Wait for December!
So, we’re basically halfway through the year. It feels like it just started, right? But seriously, June is a pretty big deal when it comes to taxes. We’ve talked about checking your estimated payments, looking at your business expenses, and even thinking about retirement plans. Doing this stuff now, instead of waiting until the last minute, can really save you a headache and, let’s be honest, some cash. It’s way easier to make smart moves when you still have time to actually make them. So, take a look at what we covered, get your ducks in a row, and you’ll feel a lot better when the holidays roll around. Your future self will definitely thank you.
Frequently Asked Questions
Why is June considered an important time for taxes?
June is like a midway point for your taxes. It’s a great time to check if your tax payments are on track, see how your business is doing financially so far, and make any needed changes to avoid big surprises later in the year, especially around December. You still have time to make smart moves!
What should I do about my estimated tax payments in June?
By June, you should have made your second quarterly tax payment. It’s smart to look at how much you’ve paid so far and compare it to how much money your business has actually made. If your income has changed a lot, you might need to adjust your next payments to make sure you don’t owe too much extra or pay too little.
How can I check my business’s financial performance mid-year?
Take a look at your sales and expenses from the first half of the year. Compare it to last year to see if you’re doing better or worse. This helps you guess how much money you might make for the rest of the year and if you need to change your spending or saving plans.
Should I think about changing my business structure?
Sometimes, the way your business is set up (like an LLC or S-Corp) might not be the best for saving money on taxes as your business grows. June is a good time to talk to a tax expert and see if changing your business’s legal setup could help you pay less in taxes.
What are some ways to manage income and expenses for tax benefits?
You can look for expenses you can deduct, like buying new equipment or paying for business supplies. Sometimes, it makes sense to delay receiving some income until next year if that helps lower your taxes now. Planning big purchases carefully can also lead to bigger tax savings.
How can I make sure I’m saving enough for retirement?
June is a good time to figure out how much you can put into retirement accounts like a 401(k) or IRA. You can also compare different retirement plans to see which one works best for you. Planning now helps you make sure you’re saving enough for your future.
