Many small businesses are so engrossed in dealing with the daily functions of their businesses that they don’t ever give a thought to income tax until the filing deadline begins to loom. It often results in last minute stress filled attempts to get the receipts and other relevant documents in order. This could be avoided if you include a year long tax saving strategy in your business plan. However, even at this late date, there are a few things that you can do that will reflect favorably when you file your 2013-2014 returns. Here are some last-minute tax deductions for small businesses.
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Wait till the end of the year to bill your clients – Consider sending invoices to your clients after the New Year. That means you have to pay taxes on that income next year. However, if you have any concerns receiving the payments, then it is wise to bill the client immediately.
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Give an end of the year cash bonus – The bonuses given to employees are tax deductible though they are subjected to payroll taxes. However, if your business files income tax on accrual basis then it is not necessary to disburse the bonuses at the end of the year.
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Upgrade your office – If you want to invest in office furniture or equipment such as printers, iPad or off-the-shelf software, then do it before the end of the tax year. Whether you have made a partial payment or purchased it outright, you can claim a full-write off. You can claim generous tax deductions even if you are buying pre-owned items for your office.
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Make cash donations to charitable institutions recognized by the IRS – You can donate cash to charities and have a maximum tax waiver of 50% on your taxable income depending on whether your business is a sole proprietorship, partnership, LLC, S Corporation or C Corporation.
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Apply for a qualified retirement plan – Protect your profits by adopting a qualified retirement plan such as profit-sharing plan or 401(k) plan. You can also include your employees in the plan on a non-discriminatory basis. However, you should work out the cost of covering the employees with your accountant when you decide to include them in the retirement plans.
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Stock up your office supplies – Make a plan to buy office supplies such as paper, toner, etc. that you plan to use throughout 2014. It is worth mentioning here, you cannot deduct prepaid expenses that run more than 12 months. For instance, if you have a prepaid three year subscription to a business magazine, the cost is deductible over the period of three years.
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Make your vacation pay for itself – Consider a location where you can mix business with your holiday. You can schedule a business lunch or dinner with your client and later on write off some of the holiday expenses as your business expenses.
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Pay all your outstanding bills – Clear all your outstanding bills using cash. This will benefit not only your balance sheet but can also be used for tax deductions.
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Consider renewing subscriptions and memberships – Before the end of the financial year, decide which subscriptions and dues in professional and trade association you want for the next year. Pay for them now and a portion of it would be deducted as per the special 12-month tax rule.
Mentioned above are some of the last-minute tax saving tips for small businesses. If you feel we have left out any significant points, please add it to our list in the comments section.
