10/15/2016

10YearEndTaxPlanningTipstoCutYourTaxBill

10 Year-End Tax
Planning Tips to Cut
Your Tax Bill
50

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Its the holiday season, and youre likely juggling a lot of tasks, both personal
and professional. I hate to add more tasks to your list, but December is the
perfect time to review your nancial situation and make some tax-planning
moves to minimize your tax bill. Here are 10 steps every small business owner
should take now to start the new year with a new and improved tax outlook.

1. Keep Up-to-Date on Tax Law Changes

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You cant monitor every single modication to tax lawthats the job of your
accountant and/or tax preparer. You should, however, stay abreast of major
changesincluding proposed changesaffecting small businesses. Reading
business news headlines regularly should alert you to anything signicant.

2. Know Your Filing Date(s)

Recent legislation may affect the ling date for your 2015 tax returns. Tax
returns for calendar-year partnerships are now due March 15 instead of April 15,
and tax returns for calendar year C corporations are now due on April 15
instead of March 15.

3. Automate Accounting and Record Keeping as Much as

Possible
Most of us dread tax time because of all the paperwork we have to gather and
organize. Eliminate this headache by automating as much of your accounting as
you can. Start now, and you'll be on track for next year. Use a cloud-based
accounting software application, such as QuickBooks
(http://quickbooks.intuit.com/?cid=sbc_ccat_10yearendtaxtips), that syncs with
your bank account and automatically categorizes and reconciles your credit
card and bank transactions.

Better yet, add an app that tracks your expenses by taking pictures of receipts
on your smartphone, then uploads them to the cloud. If you use mobile
payment processing apps, such as PayPal or Square, get accounting software
that syncs with them, too.

4. Use the Cloud

When you use cloud-based accounting software to organize your nancial
information, you and any authorized employees can easily access it securely,
wherever you are. You can also share your nancial records with your
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accountant and/or tax preparer, which can greatly simplify preparation ahead of
tax time.

5. Defer Income and Accelerate Deductions (Maybe)

Whether your business is a partnership, sole proprietorship, limited liability
company (LLC), S corporation or C corporation, the individual and corporate
federal income tax rates are scheduled to remain the same in 2016 as they are
this year. That means:

If you expect your business to be in the same tax bracket or lower in 2016,
defer revenues until next year so that you won't pay taxes on them until
you le for 2016. Accelerate your expenses into this year, so you can enjoy
the deduction now.
If you expect your business will be in a higher tax bracket next year than it
is this year, accelerate revenues into 2015 so they'll be taxed at this year's
lower rate. Postpone deductible expenses until next year so you can enjoy
the deduction when your tax rate is higher.

To defer income, wait until the end of December to invoice

(http://quickbooks.intuit.com/invoicing/) your customers, so that you won't get
paid until 2016. To accelerate expenses, pay bills by December 31, even if
they're not due until January.

If you use the cash basis method of accounting, you can defer expenses by
using your credit cards to pay vendors or other business expenses in December
so you won't actually pay the bill until next year. Or you can mail checks to your
vendors at the end of December so they won't be cashed until January.

6. Assess Your Accounting Method

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In the cash method of accounting

(http://quickbooks.intuit.com/r/bookkeeping/understanding-the-basics-of-cashaccounting), you record income and expenses on your books at the time the
money changes hands. In the accrual method
(http://quickbooks.intuit.com/r/bookkeeping/understanding-the-basics-ofaccrual-accounting), you record income and expenses at the time the sale is
made or the expenses incurred, even if no money changes hands for months.
Whether you use the cash or accrual basis can make a big difference to your
taxable income. If you don't know which method you're using, check Line F of
your business' rst Schedule C submission.

Small business accounting software (http://quickbooks.intuit.com/?

cid=sbc_ccat_10yearendtaxtips) generally enables you to create reports
showing the difference between cash basis and accrual basis accounting, so
you and your accountant can determine whether switching from one method to
another is a good idea for the coming year. If you want to change it, you'll need
to submit an application to the IRS, so allow plenty of time for this process.

7. Max Out Your Retirement Plan Contribution

Why not give your money to yourself instead of to the taxman? Making a pretax contribution up to the maximum amount allowable for 2015 will reduce your
taxable income for this year. You have until December 31 to make your 401(k)
contributions and until April 15 of next year to make IRA contributions.

8. Give Back to the Community

Another way to accelerate your expenses in 2015, if you need to do so, is to
make a contribution to charity before the end of the year. Choosing a local
charity can endear you to your customer base in addition to providing a tax
break. Just make sure that the organization you choose is qualied.
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9. Plan for All Contingencies

Adding to the headache of small business tax preparation for 2015, as of
November 30, Congress had yet to renew some 50 business tax credits that
have expiredand they have until December 31 to do so. Among the credits
affecting small business owners are:

Section 179 deductions: Businesses used to be able to deduct up to

$500,000 worth of new equipment or software in the year in which the
purchase was made; that limit has dropped to $25,000.
Bonus depreciation: This tax credit, which allows deductions of up to 50%
for qualied purchases of business property in the year of purchase,
expired at the end of last year.
Work Opportunity Tax Credit: This tax credit allows small business owners
to deduct part of the cost of hiring employees in certain target groups,
such as military veterans, people on SSI or recipients of food stamps.

It remains to be seen whether all of these credits will be extended or not. If they
don't get extended until, say, December 30, it will be too late to do much about
it. Have your tax preparer calculate your tax liability both with and without these
and any other expired tax credits that are relevant to your business. This way,
you'll have informed choices to make no matter what Congress decides to do.

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(http://quickbooks.intuit.com/self-employed-center/complete-guide-to-taxes-for-the-selfemployed-pillar/)

10. Put Aside Money to Pay Your Tax Bill

Many small business owners run into trouble when they can't pay their taxes in
full, and have to start paying nes and penalties. Prevent this nightmare by
setting up a separate bank account for your taxes. With an estimate of your tax
liability in hand, set aside a certain amount of money every month or every
quarter, so you'll be ready to write that check come April.

For more tax-time tips, see our guide to taxes for the self-employed
(http://quickbooks.intuit.com/self-employed-center/complete-guide-to-taxesfor-the-self-employed-pillar/).

Get started with QuickBooks

for as little as 50 a day
Try It Free
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