Last Minute Tax Saving Tips
December 31st was the expiration date for accumulating some tax deductions that were available to small businesses. While tax filing day is next month, if any of the below opportunities were captured, remember to report them to lower your tax bill.
As with all tax matters, seek the advice of a tax expert to verify what is available and appropriate for your company. Some last-minute tax-saving opportunities to ask about include:
Business deductions
If you find yourself facing a large tax liability, you can get an offsetting tax deduction by purchasing computers, furniture, manufacturing equipment, vehicles, software, and other items for your company. Check with your accountant to be sure that anything you consider purchasing will constitute a legitimate business deduction. Per year business deductions often have a cap, so also research what the current limits are before making any purchases.
Deferred payments
Sometimes it is possible to put off income or payments to your company until after the new year. This deferment can lower your tax bill since payments received after the end of the year can be used to offset next year’s tax liability.
Expenses for next year
Again, if you have the cash on hand and you expect a large tax bill, consider paying now for electricity, legal fees, membership fees, insurance, education expenses, and other bills that you would otherwise pay for in January. If these bills are coming due shortly after the end of the year, you may as well benefit from taking the deduction against this year’s income. Of course, again, always verify that your expenses are legitimate before doing this.
Employee bonuses
If you have funds available to give employee bonuses, consider this last-minute deduction. The amount of the bonuses is deductible along with any associated payroll taxes.
Keogh retirement accounts
Keogh retirement accounts are one of the retirement savings options available to small business owners. Keoghs must be established by the end of the year, but once they are, you can contribute retirement funds for yourself and your employees and take the contributions as a deduction. There are pros and cons to all retirement plans so speak with your tax advisor to make a final decision.
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