6 year-end tax tips for small businesses
Saturday, October 25, 2014
I attend a handful of conferences every year. Today I'm at one of my favorites, BlogathonATX.
It's local (no airport lines!). It's very local (a 15-minute drive from my house). It's on a Saturday (no horrendous Austin traffic!).
But the main reason I love BlogathonATX is that it brings together a great group of Central Texas writers, bloggers, speakers and all-around fun folks.
Wait! Don't leave! This isn't going to be an inside baseball, self-serving piece about how cool it is to blog or live in Austin, although that's mostly true.
But the real benefit of BlogathonATX is that it offers some tangible benefits, to those I'm sitting among and, I hope, for all y'all reading. Especially if you're a small business owner.
Blogs and other businesses: Created by Austin's online illustrator savant and incredibly entertaining @IleenieWeenie, BlogathonATX is a day-long mass discussion of how to run a successful blog. But you can put another "b" word in place of blog.
Today's unifying theme is that you operate a successful blog the same way you run any profitable endeavor: You treat it like a business.
A lot of folks, whether they blog or make furniture or any of the other hundreds of professions listed under the North American Industry Classification System, or NAICS (and used when filling out line B on your Schedule C at tax time), get into a line of work without proper planning.
Then they compound that mistake at tax time, by not paying attention to the tax implications of their endeavor.
Being a business taxpayer is different from filing as an individual. But both tax circumstances share one thing. When it's time to file your return, it's generally too late to do anything to lower your taxes.
Don't be one of those seat-of-your-pants' business owner. You still have around 10 weeks to make year-end tax moves that could lower your business' tax bill. Here are five.
1. Project your income: It's called an income tax for a reason. How much you make is the basis for how much you owe. Every business owner obviously wants to make as much money as possible. But sometimes that success comes as a bad surprise at tax time.
So that you know what your tax bill might look like, examine what your year's earnings are likely to be. We're deep enough into the year so that your projection is likely to be pretty accurate. Once you get that amount, you can calculate your expected tax bill and develop a strategy to minimize, where possible, your taxable income.
2. Defer income if possible: I get it. Turning down money is antithetical to why you started your business. But it can be smart from a tax standpoint, as long as it otherwise works within your budget.
There are a variety of ways to defer income. My favorite is delaying year-end billing. This can be accomplished as simply as not sending out invoices until the very end of this year or the start of the next. Or you can set up your client contracts to note that payment will be pushed into the next tax year.
Remember, though, that you'll owe taxes on the money you push into the next tax year. Make sure that won't cause you added tax and financial problems in the coming months.
3. Accelerate deductions: If you can't slow your income stream, look into speeding up deductions that can reduce the taxable amount. Here you can claim business expenses (professional membership dues, office supplies, subscriptions to trade journals, etc.), buy equipment (furniture, machinery) and paying next year's state and local income tax liabilities by Dec. 31.
Keep in mind that your deductions need to meet Internal Revenue Service standards. Basically, they must be ordinary and necessary for you to do your business.
Note, however, that all these things will reduce your deductions in the next tax year. Make sure you really, really want them now instead of the coming tax year.
4. Expensing: Some business equipment falls under the Section 179 deduction. This special part of the Internal Revenue Code lets business owners immediately deduct capital assets rather than depreciate them over their useful lives (and several tax years). Right now, the expensing limit is $25,000. However, Congress could raise this amount to as much as $500,000 if it approves the expired tax extenders by the end of the year. Stay tuned!
5. Travel and other conference costs: As I mentioned at the start of this post, BlogathonATX is a local conference. But I still can deduct the miles I drive to the event. So can the guy sitting across from me who drove here from Houston.
I've yet to run across anyone who flew in for the conference. Those folks, however, could write off the airfare as long as attendance is a legitimate business reason, not just to nosh on all the goodies!
Do you attend conferences related to your industry or business? Be sure to keep good records of your travel, the conference costs and even meals where you and another attendee talked about your work. They could be valuable tax deductions.
6. Think about retirement: While you're trying to make a go of your business, it's hard to think about when it will end. But you need to, for both your future lifestyle as well as for taxes. You can combine both those needs by opening and/or contributing to a retirement account.
Small businesses have several options when it comes to retirement plans. Since most of the attendees at BlogathonATX are like me, a sole proprietor, I'm going to focus her on self-employed retirement plan options.
You've got the solo 401(k), also called an individual(k); a simplified employee pension, or SEP, typically referred to as a SEP-IRA; a savings incentive match plan, or SIMPLE, plan; and a Keogh plan.
The various plans offer different amounts that can be contributed. They also have differing deadlines. For example, it's too late to set up a SIMPLE; that deadline was Oct. 1. You have until Dec. 31 to open a Keogh; but you can contribute to it next year for this year.
The SEP-IRA deadline is the most flexible. You can set one up and contribute for the current tax year as late as next Oct. 15 if you get an extension to file.
Check them out to see which meets your financial, tax and timetable needs.
I hope some of these half dozen business tax tips can help make your small company's taxes easier and less.
I also hope that someday we get a chance to meet each other in person at some work-related, tax deductible conference.
You also might find these items of interest:
These tips are very useful. If you are serious about tax planning for your family then you want to make sure you understand the current set of tax laws. It is important to make sure you are keeping the correct receipts, planning for the right deductions, and making smart purchases.
Posted by: Robert Apperson | Thursday, December 18, 2014 at 06:26 AM
The first thing you need to do is to ensure that you have identified all the different taxes your business is liable for. Most businesses would have to account for VAT, PAYE/NIC, corporation tax, capital gains tax and income tax. Knowing which taxes you are liable for is the first step you need to take if you plan to minimise your liability. It is always advisable to employ the services of a professional and qualified accountant, because there are many pitfalls to avoid in tax planning.
Posted by: Victory Tax Solutions | Thursday, November 20, 2014 at 04:26 AM