The End is Coming (Tax Year-End, that is)
Dec 6, 2011
December is a most wonderful month. First of all, the Christmas holiday season is in full swing, people seem to be nicer to each other (most of the time!), most of us send and receive letters & calls from family and friends who live far—we may even travel and visit them in person. We buy presents for others, often not thinking of what we will get in return (most of the time!). We even get a little relief from the heat and humidity for which our area is so well known.
December also means that the end is near for the tax year. Your Uncle Sam can’t wait for the holidays to end so that you can send him his share of your money. If you’re like most people, you don’t want to share so much with your Uncle Sam. How do you do it, though? This is one “relative” you can’t avoid. He’ll always be there with his hand in your wallet. Here are a few tips to help keep your Uncle at bay.
If your business is looking at a good profit for the year, try this:
If you’ve been thinking of getting a certain piece of machinery, equipment, vehicle or other big-ticket business asset—buy it this year. With 179 and bonus depreciation, we can accelerate the deduction and in some cases even take 100% of the cost of the asset—even if you’ve financed it and did not pay for it with your own cash. For 2011, even $250K of some qualified real property qualifies!!!
Businesses that use cash basis (most small businesses) can pay as many bills and mail them on 12/31, give employees year-end bonuses, throw company Christmas parties, and stop collecting money for the year so that the income stops flowing into the company accounts.
For those businesses using accrual method, make sure you order materials etc that you can receive in December but won’t have to pay for until 30 or 60 days later. Most of the time (schedule an appointment with us to make sure you’re one of these “mosts”), you can deduct company bonuses as long as they have been declared before year end, and employees have met clearly defined goals as long as the bonuses are paid within 2 ½ months after the year’s end.
You can always come in for a tax consultation or make a prepayment on your tax preparation fees and get a deduction for accounting expense!
Conversely, if your business isn’t looking so hot, do the reverse because you don’t want to put your checking account in jeopardy—don’t get all caught up in the mindset of “it’s the end of the year—I’ve got to go spend money!” That only works when you’re trying to bring profits down.
For individuals, try these things:
Those who itemize (file schedule A), boost up your charitable deductions & make sure to pay your property taxes by 12/31 (even if not due until January). If you have large medical procedures that will not be covered by insurance (wisdom teeth pulled, surgery, family needs glasses etc) schedule them and pay for it with your credit card before the year ends to exceed that 7 1/2 % floor. You can even choose to “double-up” by alternating years on these deductions. Sometimes it makes sense—call us for appointment.
Get those energy efficient improvements done before 12/31/11. There are also some electric cars that qualify for very large tax credits—Hybrid Tahoes, Escalades, etc don’t qualify—we’re talking those tiny electric cars.
If you are covered under a company retirement plan, try to contribute as much as the plan—and your checking account—will allow in order to reduce your taxable wages. These deductions from your pay have to be done before your last check is issued to you, so hurry (however, your deadline for traditional IRA contributions is 4/15).
Here are a few things are set to expire by 12/31/11 (could be renewed, but not as of right now)
The aforementioned real property section 179 deduction will expire
The $1 million limit on section 179 drops to $125K
The 100% bonus depreciation limit drops to 50%
The $250 teacher expense deduction will expire
The Work Opportunity Credit will expire
The 2% employee social security break will expire
The deduction for state and local general sales taxes will expire
The mortgage insurance premium deduction will expire
The above are only a few general tips. You are special to us, and your situation is special, too. If you want more detailed information on any of the above, call us to set up your appointment. Hurry though, the end is coming.