Procrastination is not something small businesses should do when it comes to taxes; in fact, it can end up costing the business money and add stress to the owner. Small businesses can save quite a bit of money if they make certain business moves before the end of the year. Here are some tips for small business owners to consider before the end of the year to lower a 2014 tax bill.
Try contributing to a tax-advantaged savings plan. By contributing to a 401(k), not only will it reduce taxable income from the current tax year, it will allow potential earnings on a tax-deferred basis to grow. Contribution to work place retirement plans must be made by Dec. 31, 2014 in order to impact 2014 taxes. The 401(k) limit is $17,500 ($23,000 for people at the age of 50 or older).
There is still time to adjust withholding. The amount of money withheld from paychecks should come close to the actual tax liability. Withholding too little will result in a larger tax bill when filing for a return; by withholding too much, an employee is essentially giving the IRS a tax-free loan. Even though the end of the year is right around the corner, there is still time to make the needed adjustments to employees’ withholding.
Sell losing investments that no longer fit your investing strategy and use the loss as a write-off against some or all the gains – in other words, harvesting an investment loss. One must be aware of the wash-sale rule that disallows the write-off if essentially the same investment is purchased 30 days before or after the loss sale. Also remember to not undermine long-term investing goals solely for tax purposes.
Charitable contributions before the end of the year are a common tax-reduction strategy for itemizing tax payers. Remember to always receive a receipt for the contribution, even if the donation is under $250. An individual can also give up to $14,000 a year to as many people as they’d like in order to help reduce the amount of the estate, and to help reduce or avoid federal gifts and estate taxes.
At Padgett Payroll Services®, our experienced tax and payroll services are designed to help you succeed. It is imperative to make sure all taxes are done correctly or it could cost you and your business time and money. Contact us today to find out about our services and how we can help better manage your taxes.
Do you have the support you need to manage your small business bookkeeping?
Contact us to schedule an appointment to speak with a local small business advisor.