2016 End of Year Tax Tips for Small Businesses

December 5, 2016 by Ed Becker

 

Being near the end of the year, it might seem like you can’t do anything to benefit your company for tax filing, but this isn’t always true. Even if you have not planned for your tax year in advance in detail, you can still do many things that can benefit your filing. This discussion will offer tips to check out for your small business. Always check with your accountant or tax professional to ensure that your choices are beneficial.

Tips to do now

Defer income

Shifting any income to the following year can save you some tax liability; depending on your income level this year and your projected income for next year. For example, if your projected income is going to push you into a higher tax bracket, you do not want to defer income and pay more taxes next year.

If you are an independent contractor you can delay December billings so that the due dates will be in January.

Buy business items

Making purchases that are necessary for your business, allows you to deduct them in this tax year. Make sure that they are for business and not frivolous purchases that could get you flagged.

Inventory

Depending on your accounting methods, and revaluation of your inventory; you may be able to claim additional deductions.

Sell off bad investments

Selling off investments to realize losses, called loss-harvesting, allows you to use the losses to offset taxable gains dollar for dollar up to $3,000. If you have more than $3,000 in losses you can carryover the excess, year after year. If you have less than $3,000 you can deduct the difference. If you file married separate, the annual net capital loss deduction is $1,500.

Decrease revenue, increase expenses

By not depositing revenue into the business account during the month of December, you will show less income for that year. You can then make a deposit in January.

Increasing business expenses, like making business purchases, also shows less profit. Purchasing items, you will need for business in the near future can reduce your net income.

• Gas deductions and auto expenses

Review your auto deductions, ensure that you are deducting all business mileage that you can expense.

• Take your Eco deductions if you have installed any new systems

If you have installed new systems that are Eco-friendly, there could be deductions that you have not considered before.

Review

• Alternative minimum tax

If you are subject to ATM, don’t pay your 2017 installments in December of 2016.

• Check extended tax credits

Check with your tax professional to see what may apply to your business.

• Know your tax bracket

This goes along with deferring income and reducing revenue. You need to know where your tax bracket is to ensure that year end income and revenue don’t push into a higher tax bracket. You also need to know the tax bracket that your 2017 projections will fall into.

• Ensure that all your checks to the Department of Revenue have been cashed

This is a task that should be done yearly to avoid penalties from payments that did not get processed timely.

Do it now and benefit this year as well as the future

• Contribute or start a retirement plan
• Charitable contributions
• Pay attention to flex spending accounts
• Start a health savings account
• Go automated to minimize audit and penalties for sales tax

Prepare for next year

• Review Reports
• Ensure that all your tax-exempt customers are up to date, to reduce audit risk
• Consider S-Corp benefits if your revenue is more than $500,000