It's not too late to take action to reduce your U.S. income taxes for 2013. Here are some post year-end tips to reduce your 2013 taxes.
Estimated Tax Payments
Paying estimated taxes, what you project you will owe, can lower the amount of the check you will write when you file your tax return. While it won't reduce your actual income taxes it can reduce any penalty for under payment of taxes. The estimated tax payment for the fourth quarter was due January 15th but you can still make estimated tax payments. So you can project the amount you will owe on your taxes and send a payment in with form 1040-ES. This can be complicated and if you need assistance I would be glad to help you as your CPA.
If you were under 50 years of age in 2013 you may be able contribute and deduct from income up to $5,500 or your taxable compensation for the year, which ever is smaller. If you were 50 or older before 2014 your limits are higher, at $6,500 or your taxable compensation for the year and again which ever is smaller. You have until April 15, 2014 to make your contribution. Be careful to specify to your financial adviser that the contribution is for your 2013 taxes.
If some or all of your income is considered self-employment income, you have an additional option -- a Simplified Employee Pension (SEP) plan. You have until the due date of your tax return, including extensions, to set up and fund your SEP for 2013. In addition, you can contribute up to 25 percent of your net earnings from self-employment (backing out the contributions themselves), up to a comfortable $51,000 for 2013.
Accrual Based Business
Remember for your accrual based business you can include expenses that you incurred and were invoiced for before year-end even if they have not been paid yet. On the other hand you also have to count income that invoiced even if you have not received it yet.
Cash Based Business
Remember too for your cash based business that any expenses you put on a credit card before year-end can be deducted in 2013. So carefully enter your credit card transactions for 2013 into your books/accounting software.
Auto and Travel Expenses
Depending on how your vehicles have been accounted for in the past you may be able to choose between actual expenses and using the standard mileage rate to deduction your auto expenses. In addition if you travel overnight for your business you may be able to choose between actual and per-diem expenses. In both of these areas a little work to make sure you have records of your mileage and overnight travel may enable you to save money on your tax return. So now is the time to review 2013 and your calander and make sure you are getting the full benefit from what the IRS allows you to deduct for your business and and un-reimbursed employee expenses.
Sometimes a little knowledge can save you some cash at tax time.
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My posts contain general information that does not fit every situation, they are not all inclusive, and as always for your tax situation everything "depends on facts and circumstances." In addition, the information/IRS requirements are always subject to change. So call me to talk about your specific facts and circumstances and what you want to accomplish.