There are only a few days left in the year. So now is the time to take those last minute tax savings.
Disclaimer: I am not a lawyer, nor do I play one on TV. So do your due diligence and either check with your CPA, tax planner, or the IRS site.
If you are a cash-basis taxpayer, as many sole proprietors are, you claim expenses as they are paid. Likewise, you claim revenue as you deposit it.
So take a quick look at your annual Profit and Loss statement and decide: Do you need more revenue or more expenses?
Now I’m not talking about making more money. I’m referring to when to claim the money.
If you are facing relatively low income for this year, as compared to what you think you will have next year, then you may want to move as much revenue into this tax year as possible. So gather up all those checks lying around and head for the bank. Send out invoices via paypal to vendors who may be willing to pay you this year. Call people who may already have an invoice they could pay. Pull as much revenue into this year as possible.
On the other hand, if you’ve made more money this year than you planned – and you may have “forgotten” to file estimated income tax, then let’s move some expenses into this year. Otherwise, you’ll have to claim more income – and perhaps pay a penalty for the estimated tax you missed.
Stock up on office supplies. From paper to pens to file folders, you can use these items “next year.” But you can pay for them this year. And don’t forget the calendars and tax software!
Prepay expenses. If your insurance is due on January 12, go ahead and pay it now. (Remember, this only applies to cash basis taxpayers!) Look at all of your other payments and pay them now.
Buy equipment that you can expense. As a Section 179 expense you can expense any piece of equipment up to a total of $108,000! (Be sure you read the IRS document on Section 179.)
Buy an SUV. No, I’m not kidding. Any vehicle over 6,000 pounds can have $25,000 of its cost expensed in Section 179. (You have to purchase and put it into use before the end of the year. If it’s not practical this year, remember this tip for next year.)
Pay your employees and contractors at the end of the year – even if it’s not their regular payday.
If ever there is a deadline you want to meet, it’s the end of the year. There is no putting it off till tomorrow. Taking action can make the difference between paying a penalty or getting a refund. So take the next hour and get your tax savings!