End of the Year Tax Tips
As we head towards the end of the year I have a few tax tips that might save you a few bucks in taxes and also keep you out of trouble. Here you go.
Business Deductions
For business owners you may consider accelerating deduction at the end of the year. What this means is that you want to pay all of your outstanding bills that are due by the end of December and also pre-pay certain expenses such as insurance and rents. For businesses that have a need for equipment such as office equipment, computers, furniture, and possibly an automobile you may want to consider making those purchases by the end of December and put them into use and you will be able to deduct those purchases this year.
Defer Income
Some business owners may have the opportunity to defer income from this year to next year. If you think that you are looking at a large tax bill this year you may want to consider moving income from 2018 to 2019 by delaying your end of the year billing to the very end of December or possibly delaying your billing to the first week of January. You may also consider not collecting on some customer payments in which you have some control over.
Retirement Plans
If you have a retirement plan either through your employer of if you are a business owner and have a retirement plan through your business you may want to maximize your retirement contribution for 2018. If you have the opportunity to make a year-end contribution to your 401 k plan for 2018, which is $18,500, and an additional $6,000 contribution if you are over the age of 50, then I would make sure that you have your salary and the resulting salary deferral to your 401 k plan set up by December 31st.
Charitable Contributions
For taxpayers who will be eligible to itemize their deductions or will be close to itemizing their deductions you may consider making a year-end donation to your favorite charity. Cash donations must be made by December 31st. Cash donations can also be made by credit card. As long as you charge your credit card by December 31st you can deduct the donation this year even if you don’t pay-off the credit card balance until 2019. For cash donations make sure you get a written receipt from the charity if the donation is in excess of $250. If less than $250 then a canceled check will suffice to substantiate the deduction. You may also consider making some non-cash contributions as well. This includes clothing, furniture, appliances, vehicles, toys, and even stocks and securities. Make sure you get a receipt for all of your non-cash contributions and I also recommend that you take digital photos of what you are donating to support that the property you are donating is in good condition.
Estimated Tax Payments
For taxpayers required to make quarterly estimated tax payments, do not forget to make your 4th quarter estimated tax payment to either the IRS or the California Franchise Tax Board. Failing to do so could result in paying estimated tax penalties and also additional interest. For most taxpayer the 4th quarter payments are not due until January 15th but you may want to consider making the payments by December 31st.