There are still some opportunities for you to reduce your business’s taxable income before December 31, so it’s important to carefully analyze your financial situation and determine if you have any of these savings opportunities to take advantage of.
Here are just a few steps you can take before the end of the year with the assistance of an accountant in Jamestown, ND to cut down on your potential tax liability:
- Defer income: You may be able to defer some income to the next year. If you do cash-basis accounting, you can delay sending out invoices or extend due dates from customers until the new year, because the income is taxed based on when you actually receive it. If you do accrual-basis accounting or do not charge until after delivery, you can delay those deliveries until the new year.
- Pay off your debts: If you know you have the cash to do so, you may wish to pay off all of your outstanding accounts payable, even if the due dates aren’t until the new year. This lets you record the expenses as part of the current tax year, which reduces your net income and your overall tax bill.
- Make purchases: Just as paying off your accounts payable can help you reduce your taxable income, so too can moving up purchases into this year. If you know, for example, you need new equipment for your office or other expensive purchases and you also know you have the cash on hand now to make those purchases, you can make them to reduce taxable income and declare additional depreciation deductions (or full price of the purchase, depending on the type of equipment you get).
- Employee bonuses: Employee bonuses are deductible on your business’s taxes, so giving year-end bonuses to all your employees can cut down on your overall tax liability. You might also consider paying employees early out of paychecks they wouldn’t get until the new year, though this may not be a preferable arrangement for some of your employees.
- Tax law changes: It’s always a good idea to stay abreast of any changes to the tax laws so you remain aware of all of the tax credits and deductions you can take advantage of. This is where working with a professional accountant comes in handy—you can guarantee they’re going to know about these changes and how they will apply to your tax situation.
- Estimated tax: Check on your estimated tax payments at least once every quarter to make sure you’ve been paying enough in taxes. If you believe your payments have been too low, you may end up owing a lot in taxes and even some additional charges based on interest. Check your estimated taxes now and pay a larger sum if necessary to avoid big hits to your finances during tax season.
To learn more about working with professional tax services in Jamestown, ND to reduce your business’s tax liability, contact the team at Craig S. Hanson, CPA today with your questions.