Dec. 31 Is Coming Fast - Plan Your Year-End Tax Moves Now

by Laurie Griffith

We’re again quickly approaching year-end. Every year it feels like it comes faster than the year before. Believe it or not, there are about 60 days left to take actions to affect your tax position for 2015. This is a good time to pause to assess your financial situation to determine what steps to take before Dec. 31 and put a plan in action to optimize your year-end tax position.

Assuming you want to minimize your tax liability for 2015, the best course of action is to delay income until next year and accelerate deductions into this year.

Income strategies: Defer, defer, defer.

• If you’re a cash-method business, delay sending invoices so payments are received in 2016.

• For accrual-method businesses, any services or shipments that can be delayed to 2016 defers that revenue (and the taxes) into next year.

Deductions: Accelerate and maximize.

• Think ahead to early 2016 expenditures and make purchases or spend on deductible items now instead of delaying into 2016. For example, repair equipment in November or December 2015 instead of January 2016.

• Pay or set bonuses before year-end. Cash-method businesses can deduct the bonuses when paid. Under the accrual method, bonus payments made within 2½ months after year-end are generally deductible as long as they are determined or set by Dec. 31.

• Deduct up to $25,000 of tangible property purchases (machines, computers, office furniture and equipment, vehicles, etc.). De minimis safe harbor rules also allow businesses to deduct purchases of $500 or less per invoice or per purchase; $5,000 per purchase is deductible if your business has applicable financial statements in place.

• Small businesses (with average gross receipts of less than $10 million) can deduct the cost of repairs, maintenance or improvements to eligible buildings up to the lesser of $10,000 or 2% of the building’s unadjusted basis.

Take advantage of health care incentives:

• Small employers (with up to 25 FTEs and average annual wages below $50,000) can qualify for a  credit of 50% of the amount of health insurance premiums paid if the insurance is offered through a Small Business Health Options Program.

• Self-employed individuals who pay their own health insurance premiums and are not eligible to participate in their spouse’s plan can deduct all health, dental and qualified long-term-health insurance premiums as well as costs of coverage for the spouse and dependents.

Expired incentives may be reinstated:

Finally, keep the expired tax provisions in mind. Many are under consideration by the Legislature and could be extended for 2015 before the end of the year. Key business incentives that expired at the end of 2014 include:

• Work Opportunity Tax Credit for eligible new hires

• Research and Development Tax Credit

• Energy-Efficient Commercial Building Tax Deduction

• Increase Section 179 expensing of qualified capital additions from $25,000 to $500,000

• Bonus depreciation (ability to immediately deduct 50% of the cost of qualified new capital additions)

• 15-year depreciation write-offs for qualified nonresidential real property improvements

• Exclusion of 100% gain on certain small-business stock

Taxes are complicated, and a conversation with a knowledgeable tax adviser can help you plan for your small business to optimize your tax position for 2015 and into 2016.

Join us at our next Sharp and On Point Speaker Series on Tuesday, Nov. 17, from 7:30 to 9 a.m. at the Lodge Des Peres as tax professionals from Lopata, Flegel & Co. share year-end tax tips. To reserve your seat or for more information, visit www.SharpAndOnPoint.com or www.LopataFlegel.com.

Laurie Griffith is a principal at Lopata, Flegel & Co. Accountants and Management Consultants. Join us at the free monthly Sharp and On Point Business Advisory Speaker Series from 7:30 to 9 a.m. on the third Tuesday of every month at the Lodge Des Peres. Learn business strategies you can immediately put in place to point your business in the right direction. For more information, visit www.SharpAndOnPoint.com.