Year End Tax Planning

Lower that tax bill!

Oh the weather outside is frightful, and so is tax planning delightful……wait, that’s not how it goes.

Well, tax planning can be delightful if you are able to lower your tax bill.

So as you get close to the end of 2014, you may want to take a good long look at what you may owe in taxes.

Below are some ways to lower your tax bill for this year:

1. Defer income – No, that’s not crazy talk.  This can lower your taxable income, if you are able to pull this off.  

You can delay billing or simply ask a few clients to pay you in January.  Quick note: don’t do this this with chronic late payers.  They do not need any additional motivation to pay late.

Keep in mind you will owe taxes on the money you push into the next tax year. 

2. Accelerate expenses – You can also hurry up expenses that can reduce the taxable amount. You can pay business expenses, such as professional membership dues, office supplies, and/or insurance or buy equipment, such as furniture, machinery, and/or computers to accomplish this.

Make sure these expenses meet IRS standards of being ordinary and necessary.  Granite countertops in your home, probably won’t count.

3. Stash cash for retirement – Unless you want to run this business forever, you need to think about retirement.  Entrepreneurs have several options when it comes to retirement plans.

There is IRA’s, SEP IRA’s, Simple IRA’s, Individual 401k’s, and a few other plans available.  Make sure to consult with your CPA and financial advisor, before selecting one.

*Disclaimer – Make sure you contact your CPA, before making any decisions on lowering your taxable income.  A good income projection will go a long way in determining which, if any of the previous methods are right for you.

Happy Holidays (yes, we include Festivus) from Hardee Accounting!