Monday, September 29, 2014

Start planning your year end taxes


Beth VadeBonCoeur,
Accountant
It's hard to imagine, but another year is almost over. Business owners often don’t think about reducing their taxes until tax season, but by then, it’s too late. The next three months are the prime time to evaluate your taxable income and to take action.

Section 179 

Section 179 of the tax code allows companies to deduct equipment in the year it is purchased. It provides an immediate deduction versus the normal depreciation over its lifespan. In past years, the limit was up to $500,000 per year, which encouraged companies to spend money on capital expenditures to spur the economy. This allowed companies to significantly reduce taxable income while investing in new equipment for their company. This year, the Section 179 limit was decreased to $25,000. Even though the deduction is smaller, it should not be overlooked. If your company has not spent more than $25,000 on new furniture and equipment this year, you should reevaluate your company’s needs to see if there are items that you should purchase before the end of this year. Could your business benefit from a new vehicle, tents or lowering device?

Timing of expenses
Are there routine repairs or maintenance that will need to occur within the next 6 months?  Do you purchase office supplies on a monthly or quarterly basis? Another easy way to reduce your year-end tax bill is by reviewing the needs of your business and your cash flow. This can help you can decide whether it would be beneficial to take care of these needs before the end of this year, instead of next year.

Bad debts
Do you have any outstanding customer accounts that should be written off before the end of the year? If the probability of collecting on an open account is low, then write the account off as a bad debt. Don’t worry, by writing an account off as a bad debt, you are not preventing future collection on that account.

Bonuses
If your company has additional income this year, consider paying bonuses to employees. Bonuses should be paid during the tax year to be expensed against taxable income. They are also a good way to show recognition and appreciation to employees that have helped make your year profitable.



This article originally appeared in Trigard Tuesdays, our weekly electronic newsletter featuring information for the funeral industry. Sign up for your free subscription at http://www.trigard.com/tuesdays.

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