Sunday, November 16, 2014

5 Year-End Tax Planning Moves for Businesses & Business Owners

Anderson Advisors writes: March 15 is the universally accepted date date for filing U.S. corporate returns that have a calendar fiscal year, so in order to ensure that you pay the Internal Revenue Service (IRS) the least possible amount, you need to plan your tax moves before the current tax year ends . To make your tax planning even more difficult our Government has once again delayed action on tax extenders, over 50 business and individual tax breaks that expired last year. They of course wanted to delay any decisions  until after the recent general election.  Either way there are still some tax breaks for businesses and business owners that might be able to help reduce your 2014 tax bill.
Here is a list of the top five moves you can make before the year end;
  1. Although the business property expensing option is greatly reduced in 2014, don’t neglect to make expenditures that qualify for this option. For tax years beginning in 2014, the expensing limit is $25,000, and the investment-based reduction in the dollar limitation starts to take effect when property placed in service in the tax year exceeds $200,000.
  2. Businesses may be able to take advantage of the “de minimis safe harbor election” AKA the book-tax conformity election, to expense the costs of inexpensive assets and materials and supplies, assuming the costs don’t have to be capitalized under the Code Sec. 263A uniform capitalization (UNICAP) rules. To qualify for the election, the cost of a unit-of-property can’t exceed $5,000 if the taxpayer has an applicable financial statement(AFS). If there’s no AFS, the cost of a unit of property can’t exceed $500. Where the UNICAP rules aren’t an issue, purchase such qualifying items before the end of 2014.
  3. A corporation (other than a “large” corporation) that anticipates a small net operating loss for 2014  may find it worthwhile to accelerate just enough of its 2015 income to create a small amount of net income for 2014. This will permit the corporation to base its 2015 estimated tax installments on the relatively small amount of income shown on its 2014 return, rather than having to pay estimated taxes based on 100% of its much larger 2015 taxable income.
  4. A corporation should consider accelerating income from 2015 to 2014 where doing so will prevent the corporation from moving into a higher bracket next year. Conversely, it should consider deferring income until 2015 where doing so will prevent the corporation from moving into a higher bracket this year.
  5. A corporation should consider deferring income until next year if doing so will preserve the corporation s qualification for the small corporation alternative minimum tax (AMT) exemption for 2014. Note that there is never a reason to accelerate income for purposes of the small corporation AMT exemption because if a corporation doesn’t qualify for the exemption for any given tax year, it will not qualify for the exemption for any later tax year.
And here are a few more that warrant consideration:
  • If your business qualifies for the domestic production activities deduction for its 2014 tax year, consider whether the 50%-of-W-2 wages limitation on that deduction applies. If it does, consider ways to increase 2014 W-2 income, e.g., by bonuses to owner-shareholders whose compensation is allocatable to domestic production gross receipts. Note that the limitation applies to amounts paid with respect to employment in calendar year 2014, even if the business has a fiscal year.
  • To reduce 2014 taxable income, consider deferring a debt-cancellation event until 2015.
  • To reduce 2014 taxable income, consider disposing of a passive activity in 2014 if doing so will allow you to deduct suspended passive activity losses.
  • If you own an interest in a partnership or S corporation consider whether you need to increase your basis in the entity so you can deduct a loss from it for this year.
The proactive business owner still can make some last-minute strategic moves to significantly reduce the amount of taxes they’ll owe next year, the key is year-end tax planning and preparation. With proper tax planning, you can maximize your potential tax savings and minimize your tax liability.In order to help you with the planning process DG Anderson has put together a Year End Tax Planning Session with one of our CPA’s for only $250, In addition next Wednesday, Ronnie Withaeger Tax Manager at DG Anderson will be host a Free live “Year End Tax Planning” webinar.  for more information on either of these please click the button below.


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