You have worked hard in 2017 and time flies… It’s already November and there’s only less than 50 days left before the year ends. Have you taken all the business deductions you need to lower your taxes this year?
If not, the good news is it is not too late! In this article, we share with you a number of tax tips you can use to offset your income.
First, and the most important TIP! Know that every dollar counts! As a taxpayer, you are entitled to claim every single deduction as long as you have adequate supporting documentation. Keeping good records is important. Hence, it is a good practice to take some time during the last quarter of the year to gather and file all your receipts, bank statements, credit cards statement and any other vendor invoices/contracts or other relevant documentation. Make sure your books are reconciled properly so that you won’t miss any deductions. Every dollar of expense counts and when added together, can turn into huge tax savings for you!
Second, any charges you make to your business or personal credit cards that day is also deductible the same day! This applies if you are a sole proprietor or single-member LLC. If you are operating as a corporation, the credit card needs to be in the name of the corporation.
The third tip is a secret that many don’t know, that is to prepay your 2018 expenses. By prepaying your expenses at the end of December, you get to enjoy the deduction for this year. The IRS Regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge. Just remember to make sure whoever you are prepaying understands this strategy and that you have proof of payments made.
Fourth, it’s not too late to purchase office equipment. The current year limit on Section 179 purchases is $500,000. Just don’t forget to place the qualifying assets in service before midnight of December 31, 2017 to get the deductions this year.
The last strategy may sound crazy to some but over the years, I have seen clients who deliberately stop billing their customers and patients just because they want to pay less taxes. By using this method, you defer your supposedly “taxable income” to the next year and will not owe any taxes until 16 months later.
Confused or have more questions? As always, you can call my office at 832-795-9612 to schedule for a tax meeting if you have additional concerns. We are here to help!
Need more guidance on how to prepare for your 2017 taxes, go to https://www.xqcpahouston.com/links-and-useful-resources.
Charlene Quah, CPA, Certified Tax Coach, QuickBooks ProAdvisor