Monday, December 30, 2013

Super Last Minute Business Tax Moves

Time is running out for 2013 and for last minute tax moves.  Here are a few tips for business owners.

Timing is everything:

How does 2013 look for your business and you personally?  Also, what do you expect for 2014? These questions are important because, for example, if you know 2014 will be much better than 2013 then you may want to time profits so that you take more income in 2013 and then you will have less in 2014.  Why would you want to do this?  Perhaps you expect 2014 to be so much better that it may put you into higher tax brackets and/or cause other taxes to "kick in" like the Net Investment Income Tax, The Alternative Minimum Tax, or the Additional Medicare Tax.  Of course it could be the other way around too and you may want to delay profits into 2014.  Either way these are timing opportunities that you can take advantage of.  Realize you will have to report the income but when you report it can affect how much in taxes you will pay.

So how do you delay or accelerate profits between years this late in the year?

  • If your business is an accrual based taxpayer you may accelerate or delay invoices to affect your revenue.  If 2013 looks better you can wait to invoice clients/customers until after the first of the year thereby taking the revenue in 2014 instead of 2013.
  • Cash based taxpayers can collect payments to accelerate income into 2013 or encourage customers to pay after the first to delay income into 2014.
  • Cash based taxpayers can also accelerate payment of business expenses into 2013 by paying them before year-end.  Recognize that this can be accomplished by putting the charge on a credit card even though you will not pay the credit card until next year.
  • You can make last minute purchases of capital assets to be deducted in 2013 if you put them in service before year-end.  If you want to reduce income for 2014 you could chose to wait to purchase capital assets until after the first of the year.

These are just a few examples of tax moves that businesses can make before the end of the year. There may be others too depending on your circumstances.  These suggestions may or may not be beneficial for your situation.  A comprehensive conversation with your CPA about your circumstances can help you to make these decisions.  I would be happy to help you as your CPA.

These can be a complex tax matters that require planning and ideally an ongoing knowledge of your situation.  I would be happy to assist you with this as your CPA and discuss different business and tax strategies with you.  Feel free to contact me using the information below.

Jeff Haywood, CPA
The CPA Superhero
The above information is general information and is not all inclusive and as always in your tax situation everything "depends on facts and circumstances."  So call me to talk about your specific facts and circumstances.