By Kevin Scanlan
Certified SCORE Mentor
Tax Reduction Steps to Consider Before the End of The Year
The holidays are almost here, ushering in the end of another year. If your business is on a calendar year basis, there may be some tax reduction steps to consider before 2020 arrives. (NOTE: this information is provided as general educational information and not tax advice.)
Pay all Outstanding Payables. If your business in on a cash-basis accounting method, and you have cash on hand, you may want to consider paying outstanding invoices that are not due until next year, this year. This allows you to take the business expense this year which will reduce your net income and tax bill.
Check Your Estimated Tax Payments. Businesses typically pay an estimated tax payment each quarter. If your estimated payments are too low at the end of the year, you could end up paying additional interest and fees.
Defer Income. You can reduce your taxable income by deferring some of your business income until the following year. For cash-basis accounting companies, income is taxed based on when you actually receive payment.
Review the Depreciation Rules. There have been some changes to the depreciation rules by the IRS. Check IRS Publication 946 for current rules.
Check for Tax Law Changes. Just like depreciation rules, new tax laws are now in effect that could impact your business, some positive and some potentially negative. Check with your tax preparer to ensure that you are following all the tax laws and regulations.
Employee Bonuses. Bonuses paid to your employees are a deductible business expense. If you pay a bonus, consider making the payment prior to end of 2019 so you can deduct the expenses this year rather than paying in the early part of next year and waiting until next year to claim the business expense.
As always, I’m happy to meet with you to discuss how SCORE might assist you with starting or growing your business. You can reach me at firstname.lastname@example.org.