The end of the year is fast approaching, but there’s still time to make adjustments in financial transactions to reduce your 2014 tax bill. Even a few minor changes such as postponing receiving any additional income and making expenses a little in advance can help small businesses to lower their IRS tax payments this year. Explained below are some of the most effective and simple ways to pay less in the coming tax season.
Paying for Expenses
You can make your expenses count for 2014 even when the actual payment will be made in 2015. To do this, you should date and mail your payment and have it applied before the end of the year. According to the tax rules, you can claim deductions on expenses made in the year in which you made your payment.
If you are considering giving bonuses or gifts to your employees, you may do so before the end of the year for them to count for 2014 taxes. Consider making any large expenses in advance that you will make early next year.
The income you receive from sources such as customers, suppliers, independent agencies, etc. can be postponed to the next year if they are due at the end of this year. Instead of collecting payment in December, you may postpone this until January, 2015.
Deduction of Depreciation
Even though the beneficial Section 179 depreciation deduction rule expired in 2013, it may be extended before the year’s end by Congress. If it is extended, qualifying new and used assets get a depreciation deduction up to $500,000! You can claim depreciation for qualifying new and used computer gear, heavy vans and pickups, office furniture, office machinery and equipment, and software. It does not include heavy SUVs.
Deductions on New Purchases
This tax break expired in 2013, but has a chance of being extended for 2014 and beyond. If it does, you can claim 50% first-year bonus depreciation on qualifying items such as office equipment, software, machinery, office furniture, etc. This deduction can be claimed on top of any deduction that you claim under Section 179 depreciation deduction.
Before the year ends, remember to confirm that Congress has extended these expired deductions. You can save substantially on taxes if this is the case.