For some of my clients, this month is like their Super Bowl. For retailers, and those who service them, here’s to an incredible month for you!
Initial reports say that there was a bit of an actual retail decline on Black Friday (though this and other reports may not be very accurate), and that online shopping grew by 18%.
Depending on the trust you place in those reports, this could be good or bad news. Hopefully there is more spending to come for what your business provides.
(By the way, I do hope you have been paying mind to the marketing strategies I’ve been writing about. Now very well might be the best time to harvest.)
And yes, I do like to write about management and marketing in these weekly Notes. But it’s a good idea to take a little time, as a business owner, to make sure that your BUSINESS tax bill stays low.
So in that spirit, I’ve put together a handy, actionable list of things you can do right now–regardless of where your business is…
“Real World” Business Strategy Note
Valerie McLaughlin’s Small Business Tax Moves for December 2015
“Don’t wish it were easier, wish you were better.” – Jim Rohn
It’s usually our job to “assess the damage” AFTER the fact, and make sure businesses like yours pay only the minimum taxes they *should* when everything comes due.
That is, of course, unless you help us plan your tax moves ahead of time. (We do still have a few spots available for this month, if you’d like to come in and chat.)
Now, it’s difficult to make blanket recommendations to all my clients, simply because everyone’s situation is different. That said, I’ve done what I can here to put together an actionable list of moves your business can make NOW, which will help you.
Of course, let us know if we can assist you with any of this…
Buy Supplies in Advance
How much paper, toner and other office supplies do you expect to use in 2016? Order it now, so the cost is deductible in 2015. Buy what you think you’ll need for the coming year, as long as you have the space to store it. A word of caution: Under a 12-month rule, you cannot deduct prepaid expenses that run more than the end of the year following the current year. For example, if you prepay a three-year subscription to a trade journal, the cost is deductible over three years.
Work Now, Bill Later
Instead of sending an invoice immediately so you’ll receive payment this week, consider waiting until next week. This will ensure that payment is received in 2016, and taxes on the income are deferred for another year. However, if you expect to be subject to the alternative minimum tax (AMT) in 2015, it may make sense to adopt the opposite approach — bill immediately to receive the income this year. The income will likely be taxed at a lower rate under the AMT versus a regular tax rate.
Get Ahead On Vendor Costs
You may have bills piled up that are not due until 2016. If you pay them now, you can deduct the expenses in 2015. Don’t have the funds in your bank account at the moment? Consider putting the expenses on your business credit card if the vendor or other party allows it. Many costs charged to a MasterCard, Visa or other major credit card before the end of the year are deductible this year even though the credit card bill isn’t due until 2016.
A note on Section 179 deductions
Currently, Congress has yet to authorize the tax extenders bill that would restore the maximum deduction for equipment placed in service to be $500,000. Currently, this maximum deduction is a paltry $25K. My recommendation is to not necessarily make any big capital improvements that would typically fall under this category until there is final clarity on this issue.
Make Those Repairs
Generally, if you simply repair a business asset, you can deduct the entire cost. But the cost of an “improvement” to business property must be capitalized.
So make repairs before the end of the year to offset your taxable income for 2015.
Be careful, though. If you make repairs and improvements at the same time, the IRS may include the cost of the repairs with the improvements, costing you an immediate tax break.
Write Off the Bad Debts
You’re not alone if you’re having trouble collecting cash from clients. As a general rule, a business’ bad debts may be deducted from gross income when they become “worthless”. But it’s a VERY good idea to keep records of all collection efforts — letters, telephone calls, emails and collection agency activities — to support deductions based on the worthlessness of the debts.
If you have such uncollectable debts, now is the time to make sure you have the documentation so you can deduct them on your company’s 2015 tax return.
I hope these are handy. And, of course, do contact us soon to schedule an appointment for more precise recommendations for you and your business! Only a few spots left…
And remember — my team and I are here for you, to help in any way we can.
Feel very free to forward this article to a business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners. And we always make room for referrals from trusted sources like you.
Warmly (and until next week),
Valerie McLaughlin, EA