Why would you want to consider tax methods when the year is nearly over? Since Year-End Tax Planning, a Lot More Than Simple Deductions.
Year-end planning is too often a missed opportunity to further enhance your existing tax situation and prepare for maximized tax savings next year. That’s a lot of value for just one meeting with your accounting professional.
Most of our clients believe tax strategy boils down to deductions. That makes sense, deductions are a huge part of the equation. After all, the objective is to decrease your taxable income so subtracting off the top is the simplest method to do that. So, let’s start with some frequently missed reductions, but make certain to check out to the end because they are simply the start of the many ways year-end planning can save you money on taxes.
Year-End Tax Planning, a Lot More Than Simple Deductions: Lets Start There
The most typically underused and even entirely missed out on deductions are with your vehicle and mileage.
If you use your personal automobile for any factor connected to your business, then the cost of that drive is deductible. It’s really easy to overthink it and make calculating percentages and breaking down costs too complicated. The easiest and the best thing you can do is track your miles. Keep a log of how many miles you drive for business purposes. A skilled accountant can use that information to determine your deductions. The reality is it’s a practice you are going to need to develop on your own. I get it. It’s not fun, but it will save you a great deal of money. It’s completely worth the effort. We recommend to clients and us a program called MileIQ on your cell phone. It tracks every trip. Or you can go old school and mark your miles in a small notebook kept in your automobile.
Travel is another commonly missed deduction.
If you go anywhere for a business purpose, even if it’s just a two-hour conference, all of your costs associated with that travel are deductible. Simply put them all under travel expenses on your books. Transportation, lodging, food, all of it! That still applies if say you happened to take your family to a theme park for 2 of the 5 days you were on your “business” trip. What you would spend for yourself to go is still deductible. Your part of the transportation, lodging, food, and so on.
Your phone expenses can be deducted if you use it for business. There’s also probably a lot of supplies that you buy that can be considered a business expense. Maybe you wrote a book, however, sales suck. Consider it a marketing expenditure and all the expenses for composing, publishing, and printing the book are deductible. It’s not too late to find what deductions you might be missing with one year-end planning session.
Year-End Tax Planning, a Lot More Than Simple Deductions: Withholdings
You’re most likely paying yourself as a company owner if your business is structured properly. If not, then you need to be. You have withholdings that are connected with that pay. This is a simple thing, but really easy to forget. It’s terrific if you are paying your withholdings each quarter. However, some owners postponed their withholdings till the end of the year and take care of it in one lump sum. Make sure that however you do it, your withholdings are accurate and current for the entire year in the fourth quarter. In this manner, you avoid unneeded underpayment penalties.
This strategy is an example of staying on top of the lots of elements of business taxes to make certain you aren’t sending a red flag to the IRS, and it saves you money in the form of penalty charges.
That’s the primary goal of everything you are wanting and whatever we do, is to assist you to keep more money in your bank. Whether that be through good money management or tax-saving strategies. Meeting with an expert for year-end planning will guarantee this does not get overlooked.
Year-End Tax Planning, a Lot More Than Simple Deductions: Corporate Rent
This one strategy has the potential to conserve you over TEN THOUSAND dollars on your taxes with no additional work. It’s honestly among our preferred techniques that we wish everyone would utilize.
A typical business practice is to lease centers in order to hold board conferences and perform important matters of business. The Internal Revenue Code 280A permits a business to rent a home or place of residence rather than a meeting facility to perform business. This is a tax method that permits an individual to rent out their house to their company.
The tax advantages come into play since the business owner has the ability to write off the amount as a rental expense, while you, the homeowner, are able to receive nontaxable income. For that reason, both parties benefit significantly from this tax method.
The basic rule of thumb for identifying the amount that you’re able to charge a business that you own or control is to figure out the amount that a 3rd party (i.e. a local hotel) is presently charging. You’re able to charge an amount consistent with the current market rate of facilities found in your very same area of place of residence. (The actual area, food/catering, video/electronic devices, tax and gratuity)
In order to defend an audit from the IRS, you need to have an arrangement to rent your home to your corporation and also documents that the meeting happened, like meeting minutes, who went to, and what costs were incurred.
Year-End Tax Planning, a Lot More Than Simple Deductions: And More …
Empowerment zones are geographical areas of high poverty that showed extra tax incentives to organizations ready to locate there. Research your area and state and you might discover an area nearby where you can save money by moving your location.
Expense segregation permits real estate owners to put more of the depreciation deductions from real estate purchases in the early years of ownership. By doing this you save more cash upfront when cash is down because of the purchase.
Donation batching is where, for example, you can stack two years of donations in one year to itemize and then take the standard deduction in the next year.
Perhaps your organization suffered a loss due to the fact that of a natural catastrophe. That casualty loss may be deductible.
Did you know that paying your kids can be a tax-saving method? Ask us about it.
If you’re in the right scenario, then this could be an amazing method for you.
We’ve only pointed out 7 items on a long list that we developed of tax-saving strategies we wanted to remain on top of for our year-end planning clients.
It’s not too late to take advantage of these tax-saving opportunities. You deserve to keep your hard-earned cash.
In the end, Year-End Tax Planning, a Lot More Than Simple Deductions!
October 2021
This blog does not provide legal, financial, accounting, or tax advice. This blog provides practical information on the subject matter. The content on this blog is “as is” and carries no warranties. TaxMedics does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. Please contact us directly to discuss how this information may be used based on your actual facts and circumstances.