We recently ran an article on year-end tax tips for individuals. To follow-up on this theme, this go around we are going to share tax tips for small business owners (SBOs).
As a small business owner, you already know that the sooner you prepare your year end taxes, the better. Tax preparation is more than gathering receipts and documents and handing them over to your CPA or tax professional – though that is certainly a good start!
Tax-savvy business owners will know to look out for ways to maximize tax strategies to reduce tax liabilities. Of course, if you have a good tax professional on your side, they should be able to walk you through the process and help you navigate those treacherous tax waters.
Small Business Owner Tax Tips
Below is a list of tax tips business owners should consider for the 2014 fiscal year end. Consult with your CPA or tax professional to determine if these strategies are right for you and your business.
Paying Vendors and Invoicing
Depending upon where you predict your business will be in 2015, you may want to pay any outstanding or upcoming vendors early or by the December 31st deadline. If you anticipate that your company will have more revenue next year, consider holding off on paying them until the new year, as the tax deductions will help offset your liabilities.
You can also consider billing clients at the end of December to put off receiving any additional payments this year. Just be aware that, while it may offset your income this year, it will add to next year’s revenue.
Consider Your Corporate Structure
Now is a great time to ask yourself if your company is structured properly. Are you running your business as a sole proprietor, a limited liability company, or a C corporation? Are you sure you are being taxed properly? If you are unsure if you have set up your corporate structure the right way, consult a professional and get started on the right foot next year!
Purchase Qualified Property
Under Section 179 expensing, businesses are allowed to expense or deduct immediately the cost of any new equipment “placed in service” by the end of the year – up to a maximum of $25,000 for the first $200,000 of property.
To qualify for this, the equipment (also known as property) must be used during the tax year you are claiming it for and be used for more than 50% of your business. If you purchase property and then get rid of it or use it for personal use in that same year, it does not count.
Energy Tax Credits
If you purchased any energy-friendly systems, such as certain solar energy systems, micro turbines, fuel cells, small wind-energy systems, geothermal heat pumps, or CHP units, you may qualify for business energy investment tax credits, which are set to expire at the end of 2016.
If you are considering getting one of these systems installed, you can still do so before the end of the year.