October is slowly coming to a close and if you own a small business it is time to think of year end tax planning. Planning strategies to think about at year end are:

1. Purchases of business fixed assets – the Section 179 expensing of assets plus 50% bonus depreciation make this a definite tax advantage. But don’t buy something you are not planning on purchasing soon anyway as the tax savings are only a portion of the cash paid out (if you are getting a loan to help defray some of the cash outlay that may make the purchase worthwhile, but some planning is in order before pulling the trigger.)

2. Look into accelerating some deductions into the current year. Remember if you are cash basis you can deduct items charged on a credit card at the time they show on the credit card balance, not the time they are paid, which will allow for deferring the payment for the deduction into next year if necessary.

3. Planning on either accelerating income to take advantage of deductions or deferring it till next year. It can be as simple as when you send your December invoices or asking for early payments, but it needs to be looked at.

4. Looking at establishing a 401K plan, which must be done by December 31. Other plans can be created later, but contribution amounts should be planned for so money is available when it is needed.

5. Reviewing year end bonuses for your corporation is a great strategy. Whether avoiding double taxation in a C Corporation or having enough reasonable shareholder compensation in an S Corporation, this is definitely the time.

6. Your company structure should possiblly be reviewed. Another type of entity may benefit the business, but plans should be made by the end of the year so the change can be made very early in the next tax year.

Any questions, please call or email us and we will try to help.

For financial, accounting and tax musings,