√ If your business is on the cash basis accounting method, defer income by delaying invoicing customers. Note that “constructive receipt” determines when income is received, which includes anything received, in hand or via the mail.
√ Also for cash basis taxpayers, pay expenses before the end of the year, whether by mailing the check or through the use of credit cards. Don’t forget to consider interest on loans and any State/County taxes.
√ Take a physical inventory count and consider items that are obsolete or damaged. If your business produces, purchases or sells merchandise, you must have an accurate accounting of each year-end inventory to compute the cost of goods sold.
√ Purchase non-inventory supplies and do any needed repairs and maintenance by year-end.
√ Pay your children for their time spent working in your proprietorship business. They can each earn up to $6,100 without having to file and pay Federal or Idaho taxes ($2,115 for Oregon), and your business gets the deduction! Remember that payroll reports and W2s need to be filed.
√ Buy equipment by December 31 to take advantage of the business property expensing option (Section 179 expense) back to 500,000 (temporarily was $25,000*) in 2014. You don’t have to pay cash; financed purchases qualify if the asset is received and put into service by year-end. Section 179 phases-out when $200,000 or more in total assets have been purchased. Note that some State amounts may be different which could result in a State taxable income amount different from your Federal taxable income. There are special rules for vehicle purchases. Vehicles under 6,000 pounds do not qualify for the Section 179 expense. SUV’s over 6,000 pounds are limited to $25,000 of allowable Section 179 expense. For more information, see my post “Section 179 Deduction“.
√ Bonus Depreciation is reestablished* allowing a deduction of 50% of qualified assets placed in service during the year..
* Note that Section 179 amount had been reduced to $25,000 and Bonus Depreciation was eliminated. Congress addressed these and other expired tax issues with the “Tax Increase Prevention Act of 2014” reinstating these items for one year. Please read my article to better understand more about this ongoing issue and the difficulty it places on you for tax planning.
√ If you want a Keogh, Profit-Sharing or Pension Plan, it must be set up by year-end. Businesses will have until the tax return deadline in 2014 to make contributions to these plans and still take the deduction on your 2014 return.
√ Set up an employee benefit program (i.e. AgriPlan/BizPlan) to take a 100% tax deduction on your Proprietorship (Schedule C or F) for family health care expenses.
√ If you anticipate having a loss from your ownership interest in an S Corporation, Partnership or Limited Liability Company (LLC), make sure you have enough basis to deduct these losses on your individual tax return.
√ Consider the effectiveness of year-end expenditures on passive business activities. If you have passive business investments (i.e. rentals) and anticipate having a loss, be aware that there are limitations to the amount of passive losses that can be taken on your individual tax return.
√ If you are considering maximizing owner profit-sharing contributions or C Corporation owner compensation, you need to have your business accounting up to date and accurately estimate year-end net taxable income, as well as make any corresponding or related transaction by December 31.
√ If you plan to incorporate your business, you need to do this before you begin operating in the next year. Contact your legal counsel to get this started as soon as possible.
Quick Links to Specific 2014 Year End Tax Planning Strategies & Checklists:
– Tax Planning & Strategies Overview
– What’s New for 2014
– Year-End Tax Planning Checklist for Individuals
√ Year-End Tax Planning Checklist for Businesses <– you are on this page.
– Checklist for Year-End Payroll & 1099 Reporting
Circular 230 Disclosure: This is to advise you that, unless expressly stated, nothing in this communication (including any attachment or other accompanying materials) was intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding any federal tax penalties, or for promoting, marketing, or recommending a partnership or other entity, investment plan or arrangement to anyone.