Tax Planning: Accelerate Deductions, Delay Income Recognition
With about 9 days left to the year there are a few things you can do to help accelerate tax deductions into 2014. These ideas are for cash based taxpayers because you get a deduction for an expense only once you have actually paid for it. Depending on your available cash, pay as many outstanding expenses as you can in order to pull that expense deduction into 2014. You can even prepay some expenses if you have the available funds in order to benefit from the tax savings in 2014 instead of 2015.
As a cash basis taxpayer, you also do not recognize income until you have received it. If you are still billing customers for services provided in 2014 but you can wait to receive the funds until 2015, then bill at the very end of the month so that you do not receive the payment until 2015 thus delaying reporting the income in 2014.
If you have durable assets that you need to buy such as computer equipment, furniture, or other items that are depreciable, buy them before the end of the month and use a credit card to pay for them. The date your credit card is charged is considered to be the date you paid for the item. If your purchase is in 2014, you get to use it as a deduction even though your credit card will not become due until 2015. You can then take advantage of the accelerated depreciation deductions like Section 179 and Bonus depreciation which will allow you to deduct as much as 100% of the purchase in 2014.
Make January state estimated payments in December so that you get that deduction in 2014 instead of 2015.
If you have not maxed out your voluntary retirement contributions for 2014, contact HR and see if you can increase your payroll deduction for the last pay period of the year in order to take advantage of that great benefit.
Every little bit helps to lower your tax liability for 2014 and push it forward to 2015.
Call us today if you need help calculating your estimated payment for January or if you need any other bookkeeping or tax preparation services. We are a full service CPA firm offering all levels of bookkeeping services and support, tax preparation and general business consultation.