So it’s almost 2020 and you’ve put off tax return preparation.  Whether you own a business or have a W2 job there are still some moves you can make to take some of the bite out of tax time.  The important thing to know right now are the deadlines for each strategy.  On January 1^st many of these options are no longer available while other strategies are available up to April 15^th.

 

For Business Owners

 

Defer Revenue.  You may want to wait and bill your customers or clients in January to push that revenue into the following year.  Be aware that payments are considered income when you receive them.  It might be tempting to wait a few days to go to the bank in January but don’t count on that strategy working if your customers issue you a 1099.

 

Go shopping!  For business owners December 31^st is the last day to make equipment purchases to have those expenses count in 2019.  The most common late year tax motivated purchases are automobiles.  With bonus depreciation you can deduct up to $18,100 for passenger vehicles purchased in 2019, the limit is raised to $25,000 for SUV’s and trucks that have a gross vehicle weight (GVW) rating above 6,000 lbs.  You can take the deduction even if the vehicle is financed.  In addition to the vehicle write off you can immediately expense (write off) business equipment (computers, furniture, tools, etc. and some interior building modifications).

 

Pay Bills!  For business expenses checks written and mailed on or before 12/31 are counted as current year expenses even if the recipient doesn’t cash the check until the following year.  If you’ve had a large income year you might consider paying all of your current bills before the end of the year.  You can usually prepay up to 12 months of insurance or service contracts and deduct them in the year paid.  Don’t prepay more than 12 months or you may have to capitalize and spread the expense over multiple future years.

 

Set up a small business retirement plan.  Contributing to a retirement plan can often yield tax savings of 25% to 25% of the amount contributed in tax savings which is a great immediate return on investment.  Talk with your investment advisor and tax person because some plans have to be set up and funded by 12/31 while others can be set up and funded the following year.

 

Count your inventory.  If your business has inventory do a thorough count as of 12/31.  You might consider throwing away or donating obsolete or damaged inventory.  Any reduction in your ending inventory amount is deductible in the current year.

 

Change your business tax type.  You might consider changing your business to a C-Corp or S-Corp now if you are expecting to earn a lot of income before the end of the year.  Often times you can find great tax savings in re-evaluating how your business is taxed.  In some cases you may form a new legal entity (usually an LLC) as part of this process.  Get on your certified public account’s calendar now to see how this could help you.

 

For W2 Employees

 

Figure out now whether you are going to owe for the year.  Do a tax assessment for the current year while you still have time to adjust your withholdings or make an estimated tax payment.  If you wait until April 15^th to pay you could get hit with under-withholding penalties.

 

Max out your 401k.  Every dollar you defer to a 401k is a dollar that you won’t owe income tax on this year.  Depending on your income you may also be able to contribute to an IRA in addition to your 401k at work.

 

Stack charitable donations into alternating years.  With the new higher standard deduction you may not have enough itemized deductions to be able to count your donations.  Discuss with your certified public accountant to see if it makes sense to double or triple your donations for one year instead of making the same donations every year.

 

Sell losing investments to harvest losses which can be used to offset capital gains now or in the future.  Be aware of the wash sale rules which basically say that you can’t take losses if you re-purchase the same stock within 30 days.

 

Now is the time to start preparing your 2019 taxes. Contact STL Tax now to start the process.To speak to one of our trusted Certified Public Accountants call 314-645-1614 or visit them at stltax.com.