This time of the year most people aren’t thinking about tax season. However, the best time to prepare for tax season is now. For business owners, taking the time to plan now can save you tremendously on your tax burden in a few months.
Here are some things that you should do now:
Have an accurate Year-to-Date Income Statement prepared: By having this prepared you will be able to estimate your tax liability for 2015 and then you can make different business decisions the remainder of the year or pay in additional estimated taxes.
Consider off-setting your profit with the Section 179 Deduction: Although this deduction automatically was reduced to $25,000 as of January 1st, 2015, based on recent years, Congress will most likely retroactively reinstate the deduction to $500,000 for 2015. The Section 179 Deduction allows business owners to deduct 100% of asset purchases in the year purchased instead of having to depreciate the asset over several years.
Stock up on Office and Business Supplies: By Purchasing supplies that you are going to need in the near future you can further reduced your business income for the year.
Give away your inventory – If you hold any goods for re-sell, giving away inventory to charity or to promote your business creates a nice tax deduction because it increases your Cost of Goods Sold (COGS). This is especially good to do for old inventory that has been sitting around for a while.
Defer Income If Possible – If you have a business where you can control the timing of billing, wait a couple of weeks to invoice your clients. Payments received after December 31st will be considered income for the following year (under the Cash Basis of Accounting). This is especially nice if you have a business that does large jobs, like a contractor.
Advertise – Advertising at the end of the year is great because you get the deduction in the current year but reap the income benefits in the following year.
Pay your bills early – If you’re still looking for ways to decrease your business income for 2015 you can pay your bills before the end of the year and you’ll likely be able to deduct the expenses this year. For example, if you mail your January 2016 rent on December 31st, you can deduct it in 2015.
*Please note that these tax tips are intended for businesses operating under the “Cash Basis” of accounting. If you operate under the “Accrual Basis” then some of them may not be appropriate for your business. If you are unsure, then you probably operate under the “Cash Basis”.
If you have any questions regarding this or any other tax, accounting or payroll issue, please contact my office at 434-3089.