Start End Of Year Tax Planning Now
Happy Nevada Day! Howdy Doody! It’s now only 52 days till Christmas and 60 days until 2016! Wait a minute! I know I was just celebrating the 4th of July recently. How did we get here so fast?
If you owed taxes last year (for 2014 returns) and would like to avoid that nightmare again, I have some ideas for you.
First, look at 2015 so far compared to 2014. Are all your income and expenses about the same? Is your tax withheld higher this year? (Or have you been paying higher estimated tax payments this year?) If so, you may be ok, but if you haven’t increased your withholding and/or estimated tax payments, now is the time to fix that while you still have two months left. A simple formula is to divide the amount you owed last year by 2 months and have that much extra withheld for the rest of 2015. If that is a bit too much, then increase your withholding by as much as you can afford and keep putting aside an extra amount until April 2016. (If you pay estimated taxes, pay a larger amount for the 4th quarter payment.)
Can you delay any income that would normally be received in 2015 to being received in early 2016? Talk to the paying party and see if they would be willing to put off the payment until early January 2016. You usually don’t get what you don’t ask for.
Do you plan on having enough to itemize in 2015? If so, you might increase your planned charity giving for 2016 into 2015. You might make your early 2016 property tax payment now in 2015. Get the idea? Accelerate some discretionary itemized deduction items into 2015. Now I have to warn you that this only saves you some tax in 2015. It then opens you up to possibly owing more tax in 2016. All this really does is gives you more time to spread out having more tax withheld to cover that.
If you own a business, use the Cash Basis of accounting, and expect to have taxable income, you can do the same as above. Accelerate early 2016 expenses into 2015, delay income from late 2015 until 2016.
On top of that, currently the expense election on purchasing new equipment is $25,000, but Congress is expected to retroactively increase that to at least $250,000 before the end of 2015. So, if you planned on making any major purchases in the next 10 months or so, accelerating that into 2015 might be a good idea.
How are your business records looking? Have you been too busy to keep them up very well? Now is a good time to start working on catching up rather that the night before your tax appointment. All too often, accounting records hastily put together miss potential tax saving deductions and have you paying more tax than you need to. One good idea? Reconcile all your bank accounts to make sure all transactions are accounted for. Another? If you use any personal bank accounts and/or credit cards for business occasionally, go through all those statements now and highlight any business related transactions.
You should call your tax preparer to go over everything now to make sure there isn’t anything else.
Have fun starting your Christmas shopping this coming weekend. Beat that Thanksgiving rush!
Prov 24:27 says, “Prepare your outside work, make it fit for yourself in the field; and afterward build your house.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.