Five Year-End Tax Tips for Your Small Business

Financial and tax planning is paramount to the success of any business. With December 31 rapidly approaching, consider these 5 tips to minimize that year-end tax bill.

Section 179 depreciation limits for qualified business property placed in service in 2014 is $25000. If your business is thinking of buying qualified equipment sometime in 2015, you may want to consider buying in 2014, and taking the tax deduction now if your business tax situation warrants. Additionally, while vehicles generally under 6,000 pounds don’t qualify for this tax break, heavy duty vehicles over 6,000 pounds while not great for the environment might be great for this tax break. (Keep in mind that the 2014 depreciation limits noted above are much lower than in prior years and bonus depreciation is no longer in place unless these tax breaks are retroactively reinstated by Congress.

Consider putting in place a pension plan for your business. It is a great way for a small business owner to save taxes, and accumulate money for retirement along with keeping and attracting talented employees.

Should you be a cash basis taxpayer, consider paying your vendors by December 31st unless you think your business income will be significantly higher in 2015 whereby those tax deductions will be more valuable in the next year. The same holds for billings. You may want to bill your clients late in December so payment is received in the following calendar year.

Make sure that your accounting records are all up to date. Remember to label correctly in your business ledgers any loans made by you or an outside source to the business. (Periodically I see loan money recorded as revenue in the ledgers, you don’t want to pay extra taxes due to sloppy bookkeeping.) Also make sure you have recorded in the business ledger any out of pocket business expenses that for whatever reason were paid with personal funds instead of business funds.

Look at your corporate structure. Are you operating as a sole proprietor when you should be an S corporation or a limited liability company?  Maybe your business has been taxed as a C corporation when a more appropriate flow-thru tax entity thru is appropriate. Consider doing this now so any change in entity structure is in place for the start of the new calendar year.

Keep in mind that all or any of the above should always be done taking into account your unique business and family situation, and should be done in conjunction with a qualified tax professional. Additionally a tax professional will keep you apprised of the ever changing tax rules and regulations.

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