Here we are in the beginning of the New Year. Maybe you’re kicking yourself for not taking tax-saving steps in the final quarter to decrease your small business taxes, or maybe you’re congratulating yourself on a job well done. Either way, there may still be a few more things you can do to decrease last year’s taxes.
Retirement Fund Contributions
Most people know about this one, but take a closer look at it. You have until filing day to make the previous year’s contribution to your own IRA, Roth IRA, or your employees’ 401k plans. Use a program to estimate your taxes due at various levels of contribution, but also keep in mind the opportunity loss if you tie up much of your cash in retirement funds. Choose the contribution level that will provide you with the best balance.
If you purchased assets last year, new or used, and had them in service before the end of the year, you may choose to accelerate depreciation. There are many rules, restrictions, exceptions, and income caps, but with the help of an experienced tax expert and following the same testing method above, you should be able to lower your tax load.
Home Office Deduction
If you have an area in your home dedicated to your business, you can deduct household expenses at a proportion equivalent to the amount of space set aside in your home. For example, if your home office occupies 1/10 of your home, you can deduct 10% of all home expenses (heat, electric, phone, trash collection, etc.).
Adjust Previous Years’ Returns
Until 2018, net operating losses (NOL) could be carried backward 2 years or forward 20 years. Now they can only be carried forward, so the carryback option no longer exists. But if you didn’t use that technique prior to 2018, you might want to have a tax professional look to see if that option or any other tax-saving options could be applied to your tax returns for the last three years.
The first quarter is a very busy time for tax accountants. Filing for an extension will give your tax professional more time to examine every tax benefit that would apply to you. Additionally, you may need extra time to get all your paperwork together to help your accountant do the best job for you. In that case, you may choose to file for an extension. You will then have 6 more months (effectively, October 15) to file your tax return. However, don’t wait to send a payment if you expect to pay taxes. Do an estimate and pay what you think they will expect in order to avoid interest and penalty charges.
Reach out to us if you need help. We specialize in personalized tax, accounting, and consulting services for individuals and small businesses in Willow Grove and the surrounding region. We’re ready to begin working for you.